tiTUlU 

■V4 


MUNICIPAL  FRANCHISES 


I 


MUNICIPAL  FRANCHISES 


A  Description  of  the  Terms  and  Conditions  upon  which 
Private  Corporations  enjoy  Special  Privileges 
in  the  Streets  of  American  Cities 


BY 


DELOS  F.  WILCOX,  Ph.D.  ^ 


CHIEF  OF  THE  BUREAU  OF  FRANCHISES  OF  THE  PUBLIC  SERVICE  COMMISSION  FOR 

THE  FIRST  DISTRICT  OF  NEW  YORK 

AND  AUTHOR  OF 

“THE  AMERICAN  CITY  ”  ;  “THE  STUDY  OF  CITY  GOVERNMENT ”  J 
“  THE  GOVERNMENT  OF  GREAT  AMERICAN  CITIES.” 


IN 

TWO  VOLUMES 


HX> 


VOLUME  ONE 


INTRODUCTORY 

PIPE  AND  WIRE  FRANCHISES 


McGRAW-HILL  BOOK  COMPANY 

239  WEST  39TH  STREET,  NEW  YORK 
6  BOUVIERE  STREET,  LONDON,  E.  C. 

1910 


Copyright,  1910,  by 
DELOS  F.  WILCOX 

Entered  at  Stationers ’  Hall ,  London ,  /T.  C.,  1910. 
All  rights  reserved 


George  E.  Hooker,  Milo  R.  Maltbie,  George  C.  Sikes, 
Robert  H.  Whitten  and  Stiles  P.  Jones, 

CONSPICUOUS  REPRESENTATIVES  OF  THE  GROUP  OF  MEN  WHO  ARE  DEVOTING  THEIR 
BRAINS  AND  THEIR  ENERGY  TO  THE  ESTABLISHMENT  OF  THE  PRINCIPLE 
THAT  “A  PUBLIC  FRANCHISE  IS  A  PUBLIC  TRUST,”  THIS 
BOOK  IS  RESPECTFULLY  AND  AFFECTIONATELY 
DEDICATED  BY  THE  AUTHOR 


PREFACE. 


The  city  has  been  rightly  called  the  battleground  of  de¬ 
mocracy.  It  is  in  these  mobile  centers  of  population,  where 
great  issues  can  be  fought  out  at  short  range  and  with  a  keen 
appreciation  of  their  importance,  that  the  political  future  of 
the  country  is  to  be  determined.  Municipal  franchises  are 
the  concrete,  definite  points  of  contact  between  large  public 
and  large  private  interests.  While  franchise  ordinances  and 
contracts  are  generally  technical,  and  often  elaborate  and 
hard  to  understand,  yet  the  interest  of  the  people  in  the 
terms  and  conditions  of  franchises  is  immediate  and  supreme. 
Franchises  have  been  regarded  as  special  privileges  granted 
by  the  government  to  particular  individuals  or  companies  to 
be  exploited  for  .private  profit.  They  are  coming  to  be  re¬ 
garded,  however,  not  so  much  as  privileges,  but  rather  as 
functions  delegated  to  private  individuals  to  be  performed 
for  the  furtherance  of  the  public  welfare  and  subject  to 
public  control. 

It  is  astonishing  that  this  subject  has  not  been  made  before 
now  the  theme  of  many  comprehensive  books.  It  is  a  fact, 
however,  that  the  field  is  practically  new  so  far  as  bookmak¬ 
ing  is  concerned.  There  are,  of  course,  numberless  magazine 
articles  and  many  special  reports,  as  well  as  a  few  books,  on 
the  question  of  municipal  as  against  private  ownership  of 
public  utilities.  Books  have  also  been  written  on  the  law  of 
franchises.  But  so  far  as  the  writer  knows,  this  volume  is  the 
first  one  to  be  published  having  for  its  subject  the  analysis 
and  description  of  municipal  franchises  as  they  exist  in  actual 
operation  in  the  cities  of  America.  On  account  of  the  com¬ 
plexity  of  the  subject,  the  great  number  of  cities  to  be  investi¬ 
gated  and  the  numerous  classes  of  municipal  franchises,  it 
has  been  found  necessary  to  confine  the  discussion  strictly  to 


PREFACE. 


viii 


the  United  States.  Even  with  this  limitation,  the  work  will 
fill  two  volumes 

Because  of  the  pressing  need  that  is  believed  to  exist  for 
the  information  contained  in  this  work  and  for  the  further 
reason  that  it  would  be  impracticable  to  issue  so  compre¬ 
hensive  a  treatise  at  one  time  with  all  of  its  parts  revised  to 
date,  it  has  been  deemed  best  to  issue  Volume  One  a  year  in 
advance  of  the  completion  of  Volume  Two.  In  the  volume 
now  presented  to  the  public,  the  author  gives  an  introductory 
analysis  of  the  modes  of  acquiring  franchise  rights,  of  the 
nature  of  franchises  and  of  the  various  possible  means  of 
restricting  public  utility  monopolies  under  private  operation. 
Such  operation  is  indefensible  unless  it  is  accompanied  by 
the  same  benefits  that  would  accrue  to  the  public  if  these 
utilities  were  operated  by  an  efficient  instrumentality  of 
government  actuated  solely  by  the  desire  to  promote  the 
public  welfare. 

After  this  introductory  discussion,  the  several  classes  of 
municipal  franchises  are  taken  up  in  order.  In  most  cases  a 
brief  sketch  is  given  of  the  history  and  importance  of  the 
utility  and  the  special  ways  in  which  it  is  related  to  the  city. 
Then  follows  in  every  case  a  description  of  typical  franchises 
in  actual  operation  in  different  cities  of  the  country.  The 
utilities  treated  in  this  volume  are  electric  light  and  power, 
the  telephone,  the  telegraph,  electrical  signals,  electrical  con¬ 
duits,  water  supply,  sewerage,  central  heating,  refrigeration, 
pneumatic  tubes,  oil  pipe  lines  and  artificial  and  natural  gas. 
For  the  second  volume  are  reserved  the  discussion,  of  the 
various  classes  of  transportation  and  terminal  franchises  and 
the  general  observations  and  conclusions  in  regard  to  the 
taxation  and  control  of  public  utilities. 

A  list  of  authorities  and  an  index,  which  the  author  hopes 
will  prove  especially  serviceable  in  the  use  of  this  volume, 
have  been  prepared. 

Great  difficulty  has  been  experienced  in  many  cases  in 
getting  the  necessary  materials  for  the  discussion  of  specific 
franchise  grants  now  in  force.  There  are  many  cities  that 
have  not  collected  and  published  their  franchise  ordinances, 
and  it  has  been  impossible  for  the  author  to  have  copies  made 
of  all  the  important  franchises  under  such  conditions.  The 
author  desires  to  acknowledge,  however,  the  great  courtesy 


PREFACE. 


IX 


of  municipal  officials  in  a  large  number  of  cities,  who  have 
promptly  furnished  upon  request  the  documents  required  for 
this  study.  Acknowledgment  is  also  due  to  many  personal 
friends  who  have  aided  in  getting  track  of  important  fran¬ 
chises  and  in  securing  documents  and  information  desired. 

In  the  preparation  of  the  second  volume  of  this  work,  the 
author  would  appreciate  suggestions  and  criticisms  from  the 
readers  of  the  first  volume. 

Delos  F.  Wilcox. 

1426  Tribune  Building, 

New  York  City, 

November  5,  1909. 


CONTENTS  OF  YOL.  I 


CHAPTER  I. 

HOW  FRANCHISE  RIGHTS  ARE  ACQUIRED. 


PAGE 


Section  1.  Importance  of  franchise  interests .  1 

2.  Successive  stages  of  public  opinion  in  regard  to  utility  franchises  2 

3.  Franchise  seekers  welcomed  as  public  benefactors .  2 

4.  Profits  suggest  boodle .  3 

5.  Profits  and  corruption  suggest  compensation .  4 

6.  Lower  rates  demanded .  4 

7.  Better  service  demanded . 5 

8.  Maintaining  public  control  of  the  streets . 5 

9.  Demand  for  municipal  ownership .  6 

10.  Attitude  of  franchise  granting  authorities .  7 

11.  Franchises  drafted  by  those  who  seek  them .  8 

12.  Public  authorities  negotiate  in  the  dark .  9 

13.  Aldermen  have  not  had  expert  advice .  10 

14.  Franchises  granted  directly  by  the  legislature. . . .  10 

15.  Franchise  rights  under  general  laws .  11 

16.  Property  owners'  consents  and  private  rights  of  way .  11 

17.  Franchise  grants  by  administrative  departments .  12 

18.  Franchises  granted  by  suburban  districts .  13 

19.  Influence  of  territorial  expansion  upon  city  franchises .  14 

20.  Franchise  grants  conditioned  upon  formal  acceptance  or  other 

specific  acts  of  the  grantees .  14 

21.  Franchises  by  “  acquiescence  ” .  15 

22.  Exclusive  franchises .  15 

23.  Franchises  that  do  not  expire  when  their  time  is  up .  16 

24.  Franchises  granted  to  different  companies .  16 

25.  Competing  franchises  absorbed  by  a  single  company .  17 

26.  Franchises  expiring  at  different  periods .  18 

27.  Franchises  subject  to  different  conditions .  18 

28.  Extensions  sought  by  the  companies .  19 

29.  Extensions  demanded  by  the  public .  20 

30.  Renewal  of  franchises  before  expiration  of  existing  grants .  20 

31.  Franchises  modified  by  judicial  interpretation .  21 

82.  Consents  to  changes  of  motive  power .  22 

83.  Trackage  rights  in  lieu  of  franchises .  22 

34.  Constitutional  and  statutory  limitations .  23 

85.  Purpose  of  this  book .  23 


XI 


Xll 


CONTENTS  OF  VOL.  I 


CHAPTER  II. 

WHAT  A  FRANCHISE  SIGNIFIES. 

PAGR 

Section  36.  The  network  of  railway  tracks  built  into  the  streets .  25 

37.  The  web  of  telephone  wires  connecting  the  buildings .  26 

38.  The  system  of  water  pipes  underground . .  26 

39.  The  high  tension  wires  carrying  light  and  power .  27 

40.  What  a  franchise  is . . .  28 

41.  Franchises  establish  monopolies .  29 

42.  What  gives  monopoly  its  advantage .  31 

CHAPTER  III. 

MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM. 

Section  43.  The  short  term  franchise .  34 

44.  The  indeterminate  franchise .  36 

45.  The  sale  of  franchises .  38 

46.  Fixing  rates  in  the  franchise  grant .  41 

47.  The  regulation  of  rates .  42 

48.  The  imposition  of  special  taxes .  46 

49.  Special  obligations  imposed  in  franchise  grants .  49 

50.  Improved  service  required .  51 

61.  Extensions  into  unprofitable  territory .  51 

52.  A  uniform  rate  without  a  minimum  charge .  53 

53.  Better  treatment  of  employees  required .  55 

54.  Controlling  the  company’s  contracts .  56 

55.  The  sliding  scale  device .  57 

56.  Division  of  profits  with  the  city .  58 

57.  The  right  to  purchase  reserved  to  the  city . .  59 

58.  Reversion  of  the  property  to  the  city  at  the  expiration  of  the 

franchise . . .  63 

59.  Profits  induced  by  creating  special  demands  for  service .  64 

60.  Profits  from  auxiliary  enterprises .  .  65 

61.  Profits  from  the  sale  of  accessoi’ies .  67 

62.  Profits  from  the  sale  of  by-products .  67 

63.  Profits  from  the  sale  of  incidental  privileges  and  surplus  services  69 

64.  Profits  from  the  exploitation  of  real  estate .  70 

CHAPTER  TV. 

INJURIES  TO  INDIVIDUALS,  AND  WAYS  OF  PREVENTING  THEM. 

Section  65.  Injuries  to  persons  and  property  made  possible  by  possession  of 

special  privileges .  73 

66.  Property  owners’  consents .  74 

67.  Requirement  of  public  approval  for  location  of  works .  76 

68.  Civil  damages .  77 

69.  Special  service  for  discommoded  patrons .  77 

70.  Elimination  of  noise,  dust,  noxious  odors  and  other  nuisances. . .  78 

71.  The  furnishing  of  service  made  compulsory .  79 

72.  Discrimination  in  rates  forbidden .  81 


CONTENTS  OF  VOL.  I  xiii 

PAGE 

Section  73.  Inspection  of  meters  and  records  of  use .  85 

74.  Standard  quality  of  service  required .  87 

75.  Safety  regulations  made  and  appliances  required .  88 

76.  Requiring  underground  construction .  90 

77.  Special  training  of  employees  required .  91 

78.  Easy  identification  of  responsible  company  required .  93 

79.  Interference  with  other  users  of  the  streets .  94 

80.  Limitation  of  obligations  that  may  be  imposed  upon  consumers.  98 

81.  A  tribunal  for  hearing  complaints .  99 

CHAPTER  V. 

TEMPTATIONS  TO  PUBLIC  WRONG,  AND  WAYS  OF  OVERCOMING  THEM. 

Section  82.  Activities  of  public  service  corporations  that  run  counter  to 

the  general  welfare .  101 

83.  Opposition  to  decency  and  public  order .  103 

84.  Bribery  of  public  officials . . .  105 

85.  Free  service  to  public  officials .  106 

86.  Distribution  of  patronage  and  business  favors .  108 

87.  Interference  in  political  nominations  and  elections .  109 

88.  Jury  fixing .  Ill 

89.  Influencing  the  judiciary .  112 

90.  Overcapitalization .  114 

91.  Looting  the  utility  through  financial  jugglery .  118 

92.  Running  a  school  of  theft .  119 

93.  Destroying  the  safety,  comforts  and  beauty  of  city  life .  121 

94.  Interest  in  opposing  improved  building  regulations .  122 

95.  Competition  vs.  monopoly  in  public  utility  enterprises .  123 

96.  Monopoly  limited  by  indirect  competition .  124 

97.  Monopoly  strengthened  by  alliances .  126 

98.  Monopoly  advantages  limited  by  increase  in  cost  of  service .  126 

99.  Influence  of  the  junk  heap  on  monopoly  advantages .  127 

100.  Advantages  of  monopoly  affected  by  fluctuation  in  the  value  of 

money .  128 

101.  Fundamental  principles  generally  agreed  upon .  130 

102.  The  elimination  of  special  franchise  values .  130 

CHAPTER  VI. 

ELECTRIC  LIGHT,  HEAT  AND  POWER  AS  A  PUBLIC  UTILITY. 

Section  103.  History  and  growth  of  the  utility .  135 

104.  Uses  of  electrical  current .  136 

105.  Electrical  equipment .  137 

106.  Patents,  licenses  and  parent  and  holding  companies .  138 

107.  Combination  with  other  industries .  139 

108.  Municipal  and  private  plants .  140 

109.  Special  conditions  affecting  this  public  utility .  141 

110.  Competitive  grants .  142 

111.  Putting  wires  underground .  144 

112.  Peak  loads  and  special  rates  for  different  services .  145 

113.  Development  of  water  power  and  interurban  transmission  of 

current .  14? 


XIV 


CONTENTS  OF  VOL.  I. 


CHAPTER  VII. 

FRANCHISE  CONDITIONS  IMPOSED  ON  ELECTRIC  LIGHT  AND  POWER 

COMPANIES.  - 

PAGE 


Section  114.  A  blanket  franchise.— Jersey  City .  150 

115.  Limited  franchises  combined  with  steam  heating  and  gas ; 

efficient  service  ;  consolidation— Salt  Lake  City .  152 

116  Revocable  grant ;  free  lighting  ;  painting  of  poles  ;  right  to  pur¬ 
chase  plant.— Duluth .  161 

117.  Joint  use  of  poles  and  conduits  ;  mechanical  gong  in  connection 

with  fires. — Richmond,  Va . 164 

118.  No  discrimination ;  union  labor;  right  to  inspect  books— Nash¬ 

ville .  165 

119.  Extensions  on  petition  ;  power  and  heat  for  city  buildings  at 

cost ;  schedule  of  rates— Rockford,  Ill .  169 

120.  Division  of  net  profits  over  fixed  percentage  ;  issue  of  bonds 

limited— Wichita,  Ks .  171 

121.  A  power  franchise  accepted  by  the  people.— Grand  Rapids,  Mich.  172 

122.  Exclusive  for  certain  period  ;  cutting  of  wires ;  right  to  pur¬ 

chase.— Cedar  Rapids,  Iowa .  175 

123.  Fixtures  to  be  removed  before  expiration  of  franchise.— Atlanta.  176 

124.  Map  showing  sub-surface  structures ;  specifications  for  poles ; 

right  to  purchase  at  stated  periods— Columbus,  Ohio .  177 

125.  Municipal  franchises  not  required;  regulation  of  rates. — 

California .  179 

126.  Additional  facilities  for  city  or  other  company  ;  compulsory 

extensions  of  service  ;  release  of  old  franchises— Seattle .  181 

127.  Monopoly  through  consolidation ;  liberal  franchise  by  vote  of 

taxpayers.— Denver .  184 

128.  A  good  franchise  vetoed  because  it  was  not  perfect— Minneapolis.  188 

129.  A  franchise  with  many  good  features.— St.  Paul .  198 

130.  An  up-to-date  franchise  ordinance  regulating  rates— Chicago .  200 

131.  Power  from  Niagara  Falls — Buffalo .  206 

132.  Perpetual  franchises  with  practically  no  conditions  attached. — 

New  York  City . 209 

183.  Simple  franchises  controlled  by  a  State  Board— Massachu¬ 
setts .  211 

134.  Most  important  features  of  electric  light,  heat  and  power  fran¬ 
chises .  212 


CHAPTER  VIII. 

THE  TELEPHONE. 


Section  135.  History  and  growth  of  the  telephone  as  a  public  utility .  217 

136.  Comparison  of  the  telephone  with  electric  light,  heat  and  power.  219 

137.  Comparative  statistics  of  the  Bell  and  Independent  systems .  220 

138.  The  American  Telephone  and  Telegraph  Company  and  its  sub¬ 

sidiaries. .. . .  221 

139.  Peculiarity  of  the  telephone  among  public  utilities .  226 

140.  Increase  of  cost  with  increase  of  business .  232 


CONTENTS  OF  VOL.  I.  xv 

PAGE 

Section  141.  Competition  vs.  monopoly .  237 

142.  Measured  rates  vs.  flat  rates .  242 

143.  Discrimination  in  telephone  rates .  245 

144.  Telephone  equipment .  249 

CHAPTER  IX. 

TELEPHONE  FRANCHISE  REGULATIONS. 

Section  145.  Public  control— Massachusetts .  252 

146.  Monopoly  without  conditions — New  York  City .  258 

147.  Stringent  conditions  proposed  for  a  competing  company.— New 

York  City .  262 

148.  Monopoly  conditioned  by  ordinance  fixing  rates— Chicago . 273 

149.  Telephone  contract  dominated  by  business  interests.— New 

Orleans .  285 

150.  Monopoly  under  Federal  laws— Washington .  289 

151.  Competition  to  reduce  rates — Indianapolis .  303 

152.  Competition  secured  through  the  Initiative— Portland,  Oregon..  808 

153.  Franchise  conditions  approved  by  the  Probate  Court — Toledo.. ..  312 

154.  Local  and  long  distance  Independent  franchises  in  the  Twin 

Cities — Minneapolis  and  St.  Paul .  815 

155.  Telephones  in  a  city  of  15,000— Ann  Arbor,  Michigan .  818 

156.  Important  points  in  a  telephone  franchise .  820 

CHAPTER  X. 

THE  TELEGRAPH  AND  THE  CONDITIONS  IMPOSED  UPON  IT  BY  LOCAL 

AUTHORITIES. 

Section  157.  History  and  importance  of  the  telegraph  as  a  public  utility .  323 

158.  Peculiarities  of  the  telegraph  in  its  relation  to  municipalities  . . .  826 

159.  Usual  characteristics  of  a  telegraph  franchise .  827 

160.  Special  franchises  subject  to  general  law  and  general  ordi¬ 

nances.— Erie,  Harrisburg  and  Lancaster .  828 

161.  Detailed  regulations  by  ordinance — Newark .  831 

162.  Licenses,  pole  taxes,  etc— Jersey  City  and  Trenton .  834 

163.  General  regulations  for  poles  and  wires — Somerville,  Mass .  836 

164.  Combinations  forbidden— Indianapolis  ;  Toledo;  Newport,  Ky.; 

Minneapolis .  838 

165.  Free  service  to  city. — Milwaukee ;  Springfield,  Ill.  ;  Cedar 

Rapids .  841 

166.  Miscellaneous  regulations— Nashville  ;  South  Bend  ;  Portland, 

Ore .  842 

167.  An  up-to-date  telegraph  franchise— Chicago .  844 

CHAPTER  XI. 

MESSENGER  AND  SIGNAL  FRANCHISES. 

Section  168.  Variety  of  uses  of  electric  signals .  849 

169.  Maximum  rates  ;  option  to  purchase,  etc. — Grand  Rapids .  850 

170.  Use  of  other  poles ;  amount  of  service  ;  rates,  etc. — Salt  Lake 

City .  853 


XVI 


CONTENTS  OF  VOL.  I. 


V 

PAGE 

Section  171.  Construction  not  to  interfere  with  local  improvements  ;  relin¬ 
quishment  of  former  rights.— Seattle .  354 

172.  An  electric  clock  franchise.— Kansas  City,  Mo .  355 

173.  Routes  described  ;  free  call  boxes  for  city. — Denver .  856 

174.  Auxiliary  fire  alarm  service.— Harrisburg ;  Erie  ;  New  York 

City .  357 

175.  Compensation  to  the  city  ;  mode  of  arbitration  in  case  of  pur¬ 

chase— Portland,  Ore .  858 

176.  Free  police  alarm  boxes  ;  city  may  use  poles. — Butte .  860 

177.  Special  provisions  of  signal  franchises  in  various  cities.— Nash¬ 

ville ;  Springfield,  Ill.;  Minneapolis .  861 

178.  Modern  franchise  for  general  signaling  service.— New  York 

City .  862 

179.  Transmission  of  music  by  electricity  proposed  in  New  York .  864 

CHAPTER  XII. 

ELECTRICAL  CONDUITS. 

Section  180.  Various  ways  of  providing  electrical  conduits .  S67 

181.  Important  features  of  conduit  franchises .  368 

182.  General  franchises  for  all  wire  using  companies. — St.  Louis ; 

Nashville .  370 

183.  A  monopoly  franchise  in  the  form  of  a  contract. — New  York  City  874 

184.  General  systems  of  municipal  conduits— Baltimore  ;  Erie,  Pa. ; 

New  Britain,  Conn . - .  882 

185.  Conduit  franchises  incidental  to  other  public  utility  services. — 

Chicago;  Troy;  Rochester;  Buffalo .  386 

186.  Independent  conduit  franchises,  not  exclusive — Syracuse ; 

Kansas  City  ;  Minneapolis  ;  Duluth .  888 

187.  Electrical  conduits  in  the  city  of  Washington .  892 

CHAPTER  XIII. 

WATER  WORKS  AND  WATER  SUPPLY  FRANCHISES. 

Section  188.  Municipal  vs.  private  ownership  of  water  franchises .  897 

189.  Uses  of  water  derived  from  public  supplies...., .  899 

190.  Franchise  features  peculiar  to  water  works .  400 

191.  Characteristics  of  a  model  water  franchise .  402 

192.  A  water  franchise  in  a  small  university  town — Ann  Arbor .  404 

193.  A  city  dominated  by  a  water  company — New  Haven .  409 

194.  A  city  having  adequate  powers  of  control— Indianapolis .  417 

195.  The  city’s  franchise  from  the  Federal  Government— Sun 

Francisco .  423 

196.  A  project  too  vast  for  private  enterprise— Los  Angeles .  431 

197.  A  franchise  forfeited  for  abuse  of  privileges — New  Orleans .  436 

198.  Cut-throat  competition  followed  by  monopoly — Denver .  440 

199.  Water  franchises  granted  to  mining  companies— Butte,  Mont. ...  445 

200.  Exemption  from  taxation ;  rates ;  quality  of  water,  etc— 

Birmingham,  Ala .  446 

201.  Regulation  of  rates— Knoxville .  448 

202.  Hot  water  from  natural  springs— Salt  Lake  City  ;  Boise .  449 


CONTENTS  OF  VOL.  I 


xvii 


CHAPTER  XIV. 

SEWER  FRANCHISES. 

PAGE 


Section  203.  Sewers  and  drains  seldom  operated  by  private  companies .  451 

204.  Capitalization  of  sewerage  and  drainage  undertakings .  453 

205.  A  failure  of  private  enterprise  to  render  service — New  Orleans...  454 

206.  Exclusive  franchise  in  a  little  town. — Long  Branch,  N.  J .  455 

207.  Extensions  to  be  based  on  reasonable  revenue — Austin,  Tex .  457 

208.  A  detailed  schedule  of  rates  and  discounts. — Atlantic  City,  N.  J.„  460 


CHAPTER  XV. 

CENTRAL  HEATING  FRANCHISES. 


Section  209.  Extent  of  the  central  heating  business  and  its  relation  to  other 

utilities .  466 

210.  Description  of  a  plant  in  operation— Johnstown,  Pa .  467 

211.  Regulation  of  rates  by  the  common  council — Detroit .  469 

212.  Rates  depending  on  price  of  coal— Kalamazoo .  473 

218.  Free  heating  for  city  buildings— Columbus,  0 .  474 

214.  Hot  water  and  steam  heating  at  different  rates— Salt  Lake  City.  477 

215.  Steam  for  both  heat  and  power— Seattle .  478 

216.  Rebates  for  poor  service.— South  Bend,  Ind .  4S0 

217.  A  franchise  good  for  any  kind  of  heat — Kansas  City,  Mo .  481 

218.  Franchise  to  be  construed  as  an  entirety— Toledo .  483 

219.  City  may  purchase  plant  or  license  a  purchaser— Indianapolis.. .  485 

220.  City’s  option  to  purchase  at  frequent  intervals — Duluth .  488 

221.  City  to  be  on  a  par  with  most  favored  customers. — New  York....  489 

222.  Steam  heating  and  conduits  combined— Nashville .  492 

223.  City  to  receive  for  franchise  2J£  per  cent  of  total  investment  in 

plant. — Newark .  494 

224.  A  100-year  blanket  franchise  for  heating,  refrigerating,  gas, 

electric  light  and  power. — Lockport,  N.  Y .  495 

225.  Steam  heating  and  electric  power  combined.— A  city  of  15,000 

near  Buffalo . 496 

226.  Heating,  ventilating  and  regulating  system  in  connection  with 

an  electric  light  plant.— La  Crosse,  Wis .  497 


CHAPTER  XVI. 

REFRIGERATION  FRANCHISES. 


Section  227.  Pipe  line  refrigeration .  498 

228.  Franchises  for  restricted  areas. — New  York  City .  499 

229.  Plant  may  be  purchased  at  expiration  of  grant — Baltimore .  502 

230.  Rates  to  be  regulated  by  the  municipality — Kansas  City,  Mo .  504 

231.  Extensions  to  earn  8  per  cent— Wichita,  Ks .  505 

232.  Regulation  of  street  work.— Seattle .  506 


xviii  CONTENTS  OF  VOL.  I. 


CHAPTER  XVII. 

PNEUMATIC  TUBES  AND  THE  FRANCHISES  UNDER  WHICH  THEY  ARE 

OPERATED. 

PAQB 


Section  233.  History  of  the  use  of  pneumatic  tubes  for  the  distribution  of 

United  States  mail .  507 

234.  Construction,  equipment  and  operation  of  pneumatic  tubes .  510 

235.  Capitalization,  costs  and  inter-company  relations  in  the  pneu¬ 

matic  tube  business .  511 

236.  Government  ownership  and  franchise  relations  with  cities .  513 

237.  General  commercial  franchises — New  York  City .  516 

238.  Revocable  permits — Boston .  618 

239.  Franchise  for  mails  only— St.  Louis .  520 

240.  Tubes  revert  to  city  after  twenty  years — Chicago .  520 

241.  Compressed  air  franchise — Dallas,  Tex .  623 

242.  Waste  water  power  utilized  to  operate  a  compressed  air  plant. — 

Richmond,  Ya .  525 


CHAPTER  XVIII. 

OIL  PIPE  LINE  FRANCHISES. 


Section  243.  Pipe  lines  for  local  distribution.— Cleveland .  529 

244.  Pipe  lines  for  through  distribution. — Toledo  and  Jersey  City....  530 

245.  A  fuel  oil  franchise— Dallas .  631 


CHAPTER  XIX. 

ARTIFICIAL  AND  NATURAL  GAS  AS  PUBLIC  UTILITIES. 


Section  246.  History  of  artificial  gas  as  a  public  utility .  533 

247.  Special  features  of  gas  franchises .  636 

248.  Natural  gas  for  heating  and  lighting .  537 

249.  Artificial  and  natural  gas  franchises  compared .  540 


CHAPTER  XX. 

GAS  FRANCHISES  WHERE  ONLY  ARTIFICIAL  GAS  IS  AVAILABLE. 


Section  250.  History  of  gas  franchises  in  New  York  City .  643 

251.  The  sliding  scale. — Boston .  660 

252.  Gas  franchises  in  other  Massachusetts  cities— Worcester ; 

Springfield;  Somerville .  664 

253.  The  lease  of  a  great  municipal  plant— Philadelphia .  566 

254.  City  may  buy  back  exclusive  franchise  at  end  of  forty  years. — 

Minneapolis .  572 

255.  Rates  to  be  fixed  by  courts  if  council  rates  are  unreasonable.— 

St.  Paul .  570 

256.  Company’s  plant  appraised  in  anticipation  of  purchase.— Des 

Moines .  679 

257.  Price  of  gas  to  be  regulated  at  intervals— Saginaw .  682 

258.  Percentage  payment  of  receipts  from  all  sources,  including  by¬ 

products— Nashville .  587 


CONTENTS  OF  VOL.  I.  xix 

PAGE 

Section  259.  Gag  charter  awarded  after  public  advertisement. — Spring- 

field,  Ill .  588 

260.  Exclusive  grant  for  twenty  years  to  highest  and  best  bidder— 

Newport,  Ky .  591 

261.  Extensions  at  the  discretion  of  the  common  council— Syracuse...  593 

CHAPTER  XXI. 

GAS  FRANCHISES  IN  CITIES  WITHIN  REACH  OF  NATURAL  GAS  FIELDS 

Section  262.  Natural  gas  superseding  artificial  gas— Cincinnati .  595 

263.  Artificial  and  natural  gas  in  competition— Cleveland .  599 

264.  Ten  per  cent  gross  receipts  tax  on  natural  gas  sold  for  more 

than  15  cents  per  1000  feet — Columbus,  O .  605 

265.  Manufactured  gas  entirely  superseded— Kansas  City,  Mo .  609 

266.  Division  of  net  earnings  with  city— Topeka,  Kansas .  618 

267.  Artificial  gas  for  lighting  supplied  by  the  city,  and  natural  gas 

for  fuel  supplied  by  companies— Wheeling .  621 

268.  Partnership  versus,  control— Baltimore .  623 

269.  Extensions  of  service— Artificial  gas  franchises  in  Indianapolis..  629 

270.  General  franchises  for  the  supply  of  natural  gas  subject  to  ac¬ 

ceptance  by  any  person  or  corporation— Indianapolis .  635 

271.  Low  rates ;  limited  profit ;  ultimate  municipal  ownership.— 

Indianapolis .  640 

.  272.  The  city’s  distributing  system  for  natural  gas  leased  on  failure  of 

supply — Toledo . . .  646 

273.  Franchise  exclusive  on  certain  conditions.— Erie,  Pa .  649 

274.  Price  of  gas  to  be  readjusted  to  new  inventions  and  improve¬ 

ments— Salt  Lake  City .  650 

275.  Rates  reduced  with  increase  of  sales — Detroit .  655 

276.  An  85  cent  rate  ordinance  passed  over  the  Mayor’s  veto.— 

Chicago .  659 

List  of  Authorities .  664 

Index  of  Volume  I . 673 


* 

' 


__ 


■ 

•  • 

■ 


■ 


t 


CHAPTER  I. 


HOW  FRANCHISE  RIGHTS  ARE  ACQUIRED. 


1.  Importance  of  franchise  interests. 

2.  Successive  stages  of  public  opinion 

in  regard  to  utility  franchises. 

3.  Franchise  seekers  welcomed  as  pub¬ 

lic  benefactors. 

4.  Profits  suggest  boodle. 

5.  Profits  and  corruption  suggest  com¬ 

pensation. 

6.  Lower  rates  demanded. 

7.  Better  service  demanded. 

8.  Maintaining  public  control  of  the 

streets. 

9.  Demand  for  municipal  ownership. 

10.  Attitude  of  franchise  granting  au¬ 

thorities. 

11.  Franchises  drafted  by  those  who 

seek  them. 

12.  Public  authorities  negotiate  in  the 

dark. 

13.  Aldermen  have  not  had  expert  ad¬ 

vice. 

14.  Franchises  granted  directly  by  the 

legislature. 

15.  Franchise  rights  under  general  laws. 

16.  Property  owners’  consents  and  pri¬ 

vate  rights  of  way. 

17.  Franchise  grants  by  administrative 

departments. 

18.  Franchises  granted  by  suburban  dis¬ 

tricts. 


19.  Influence  of  territorial  expansion 

upon  city  franchises. 

20.  Franchise  grants  conditioned  upon 

formal  acceptance  or  other  speci¬ 
fic  acts  of  the  grantees. 

21.  Franchises  by  “acquiescence.” 

22.  Exclusive  franchises. 

23.  Franchises  that  do  not  expire  when 

their  time  is  up. 

24.  Franchises  granted  to  different  com¬ 

panies. 

25.  Competing  franchises  absorbed  by  a 

single  company. 

26.  Franchises  expiring  at  different 

periods. 

27.  Franchises  subject  to  different  con¬ 

ditions. 

28.  Extensions  sought  by  the  companies. 

29.  Extensions  demanded  by  the  public. 

30.  Renewal  of  franchises  before  expi¬ 

ration  of  existing  grants. 

31.  Franchises  modified  by  judicial  in¬ 

terpretation. 

32.  Consents  to  changes  of  motive 

power. 

33.  Trackage  rights  in  lieu  of  franchises. 

34.  Constitutional  and  statutory  limita¬ 

tions. 

35.  Purpose  of  this  book. 


1.  Importance  of  franchise  interests- — The  franchises  and 
public  utility  fixtures  in  the  streets  of  New  York  City  are 
assessed  at  a  little  less  than  $500,000,000  under  the  franchise 
tax  law.  The  public  service  companies  holding  these  fran¬ 
chises  are  capitalized  at  more  than  $1,000,000,000.  In  the 
United  States  as  a  whole,  the  street  railways  alone  were  in 
1907  capitalized  at  $3,775,000,000,  and  their  movements  in 
that  year  were  equivalent  to  the  running  of  one  car  more 
than  1,600,000,000  miles.  On  the  average,  20,400,000  pay¬ 
ing  passengers  were  carried  by  the  street  railways  every  day 
of  the  3^ear.  In  the  year  1900  the  capital  invested  in  the 
business  of  manufacturing  gas  was  estimated  at  $567,000,- 

1 


2 


MUNICIPAL  FRANCHISES. 


000,  and  the  total  output  of  coal  and  water  gas  in  1907  was 
about  150  billion  cubic  feet.  Electric  light  and  power  com¬ 
panies  in  1907  had  a  total  income  of  more  than  $175,000,- 
000.  Telephone  companies,  forming  one  of  the  most  recent 
classes  of  important  public  service  corporations,  were  capital¬ 
ized  in  1907  at  $815,000,000;  and  the  various  telephone  sys¬ 
tems  in  the  United  States  furnished  facilities  for  more  than 
eleven  billion  conversations  during  that  year.  Street  rail¬ 
ways,  telephones,  telegraphs,  gas  and  electric  light  and  power 
works,  central  heating  plants,  and  privately  owned  water 
supply  systems,  involving  stupendous  investments  and  ren¬ 
dering  necessary  and  almost  limitless  services  to  the  people 
living  in  cities,  and  even  in  many  cases  to  the  inhabitants  of 
the  rural  districts — all  these  undertakings  are  enabled  to 
operate  only  by  virtue  of  special  franchises,  granted  by 
governmental  authority  for  the  use  of  the  public  streets. 

2.  Successive  stages  of  public  opinion  in  regard  to  utility 
franchises — All  new  improvements  have  to  overcome  the 
prejudices  of  conservatism.  Public  utilities  are  no  excep¬ 
tion  to  this  rule.  Gas  lighting  was  about  thirty  years  in 
getting  established.  It  was  twenty  years  after  the  first  horse 
car  line  was  started  in  New  York  City  before  street  rail¬ 
ways  really  commenced  to  develop.  The  great  expansion  in 
telephones  and  electric  lighting  came  a  quarter  of  a  century 
after  these  utilities  had  been  introduced.  With  the  com¬ 
plete  demonstration  of  a  new  utility,  however,  old  prejudices 
disappear  and  the  public  assumes  an  attitude  of  friendliness 
which  takes  on  many  different  forms.  The  stages  of  eagerness 
passed  through  by  the  people  are  not  exactly  the  same  in  any 
two  communities  or  with  regard  to  any  two  utilities.  Differ¬ 
ent  currents  of  public  sentiment  are  moving  at  the  same  time, 
and  the  normal  chronological  succession  of  conscious  public 
desires  is  frequently  upset.  But  with  these  reservations,  it 
may  be  said  that  there  has  been  a  logical  development  in  the 
general  attitude  of  public  opinion  toward  franchises  through 
seven  stages  of  eagerness,  from  the  heedless  greed  of  the  land 
speculator  to  the  hopeful  enthusiasm  of  the  man  who  looks 
to  municipal  ownership  for  the  millennium. 

3.  Franchise  seekers  welcomed  as  public  benefactors. — 
The  exeperience  of  American  cities  in  franchise  granting 
makes  a  dark,  but  instructive  chapter  in  the  political  and 


HOW  FRANCHISE  RIGHTS  ARE  ACQUIRED. 


3 


business  history  of  the  country.  In  the  early  days  of  the  vari¬ 
ous  public  utilities,  as  soon  as  they  have  passed  the  experi¬ 
mental  stage,  persons  asking  for  franchises  are  hailed  with 
enthusiasm  by  the  citizens,  upon  whom  the  pressure  of  urban 
conditions,  unrelieved  by  modern  conveniences,  is  becoming 
unbearable.  The  chief  thought  has  been,  as  it  is  even  now 
in  the  smaller  and  younger  cities,  to  get  the  new  improve¬ 
ments,  at  whatever  cost.  The  passion  to  grow,  and  by  grow¬ 
ing  to  multiply  business  and  enhance  realty  values,  has  been 
almost  universal  among  cities  and  towns  with  any  ambition 
at  all.  Public  service  corporations,  in  the  early  days  of  a 
city,  are  welcomed  as  public  benefactors.  The  men  who  risk 
their  capital  in  experimental  services  are  thought  of  as  ex¬ 
ceptionally  good  citizens.  A  franchise  is  regarded,  not  as 
throwing  a  burden  upon  the  municipality,  but  rather  as  offer¬ 
ing  a  necessary  inducement  to  the  initiation  of  a  much  needed 
service.  Street  railways  make  a  partial  exception  to  this 
rule.  The  instinct  of  the  city  councils,  even  in  the  early  days, 
often  told  them  that  these  new  burdens  upon  the  public  street 
should  be  kept  carefully  under  municipal  control.  As  a 
result,  in  certain  early  street  railway  franchises  there  may 
be  found  some  of  the  most  stringent  conditions  ever  imposed 
upon  public  service  companies.  Such  conditions  marked  the 
experimental  stage  of  street  railway  building  in  some  of  the 
older  cities,  including  New  York,  Philadelphia  and  Baltimore. 
But  as  soon  as  cities  had  become  accustomed  to  having  car 
tracks  in  their  streets,  the  pressure  for  improved  transporta¬ 
tion  became  irresistible. 

4.  Profits  suggest  boodle.— As  the  prosperity  of  the  com¬ 
panies  increases  and  the  most  profitable  franchises  are  being 
taken  up,  it  begins  to  dawn  upon  the  political  parasites  of 
the  cities  that  a  franchise  is  worth  money.  There  are  at¬ 
tracted  to  the  council  chambers  unscrupulous  men  who  look 
upon  political  power  as  a  means  of  self-enrichment  through 
blackmail  and  bribery.  Then  a  new  epoch  in  franchise  grant¬ 
ing  is  ushered  in.  Meritorious  applications  are  referred  to 
committees,  where  they  sleep  mysteriously.  Other  appli¬ 
cations  with  apparently  less  in  their  favor,  are  recommended 
by  committees  and  passed  without  debate.  It  is  believed  that 
in  many  cities  the  use  of  corruption  funds  by  franchise 


4 


MUNICIPAL  FRANCHISES. 


seekers  becomes,  at  times,  so  habitual  that  bribery  is  regarded 
as  almost  a  conventional  offense.  This  condition  holds  dur¬ 
ing  the  long  period  between  the  time  when  the  aldermen 
learn  that  franchises  are  valuable  and  the  time  when  the  peo¬ 
ple  at  large  learn  it. 

5.  Profits  and  corruption  suggest  compensation — The 

stench  of  corruption  and  the  gradual  recognition  that  muni¬ 
cipal  franchises  are  monopolies,  and  in  rapidly  growing  cities, 
monopolies  of  great  value,  result  in  a  demand  that,  not  the 
aldermen,  but  the  taxpayers  at  large,  should  receive  compen¬ 
sation  for  franchise  grants.  Accordingly,  all  over  the  United 
States  a  demand  has  arisen  at  one  time  or  another  that  fran¬ 
chises  should  be  sold  to  the  highest  bidder,  either  for  a  lump 
sum  or  for  a  percentage  of  gross  receipts  or  for  an  annual 
rental,  to  the  end  that  the  companies  occupying  the  public 
streets  and  getting  rich  off  the  necessities  of  the  people, 
should  be  compelled  to  contribute  a  fund  to  lighten  taxation. 
This  idea  received  a  great  impetus  in  the  last  decade  of  the 
nineteenth  century  from  the  stories  of  municipal  manage¬ 
ment  in  Great  Britain  and  on  the  Continent.  For  several 
years  it  was  generally  believed  in  the  United  States  that  Glas¬ 
gow  was  making  enough  money  from  its  public  service 
utilities  to  do  away  entirely  with  the  necessity  of  taxation. 
Naturally  the  property  owners  and  other  direct  taxpayers  in 
American  cities  were  attracted  by  this  promising  idea,  and 
laws  were  passed  in  various  states  requiring  that  franchises 
be  sold  at  auction  to  the  highest  bidder. 

6.  Lower  rates  demanded — In  American  cities  only  a 
minority  of  the  people  are  direct  taxpayers,  and  after  a  while 
the  workingmen,  clerks  and  others  who  have  to  ride  on  the 
street  cars  and  pay  gas  bills,  begin  to  think  that  the  most 
important  reform  in  reference  to  these  services  is  a  reduction 
in  rates.  Appealing  to  the  masses  of  the  voters,  therefore,  a 
new  class  of  city  politicians  arises,  demanding  lower  street 
car  fares  and  lower  rates  for  gas,  water,  electric  light  and 
telephones,  to  the  end  that  the  consumers  of  these  services 
may  themselves  get  the  benefit,  and  not  be  taxed  either  to 
make  a  few  franchise  holders  enormously  rich  or  to  relieve 
the  property  owners  from  the  burdens  of  government.  The 
great  struggle  for  lower  rates  is  still  going  on,  although 
there  have  already  been  large  reductions,  especially  in  the 


HOW  FRANCHISE  RIGHTS  ARE  ACQUIRED. 


5 


prices  of  gas  and  electricity.  In  cities  like  Detroit,  where 
different  rates  of  fare  have  been  charged  on  different  street 
railway  lines,  it  has  been  observed  that,  other  things  being 
equal,  rents  are  higher  in  the  vicinity  of  the  cheaper  lines. 
On  the  other  hand,  when  the  rates  of  fare  or  the  prices  of 
light  are  reduced,  these  reductions  are  often  met  by  poorer 
service  on  the  part  of  the  companies.  It  is  a  common  saying 
in  Detroit,  that  on  the  three-cent  lines  at  the  rush  hours, 
men  have  to  hang  onto  the  cars  “  by  their  eyebrows.”  And 
whenever  in  any  city  the  price  of  gas  is  cut,  large  numbers 
of  citizens  complain  that  their  light  is  poorer  or  that  their 
bills  are  no  smaller. 

7.  Better  service  demanded. — Seeing  the  benefits  of 
lower  street  car  fares  going  largely  to  the  land  owners  and 
the  benefits  of  lower  rates  in  all  public  utilities  being 
largely  offset  by  poorer  service,  many  people  have  abandoned 
the  idea  that  compensation  to  the  city  and  lower  rates  to  the 
consumers  are  the  most  important  things  to  be  looked  out 
for  in  franchise  grants.  “  Better  service  ”  has  come  to  be 
their  slogan.  In  street  railway  operation  their  demand  in¬ 
cludes  more  rapid  transit,  less  strap-hanging,  better  lighting, 
heating  and  ventilation  of  cars,  etc.  In  the  telephone  service 
there  has  been  an  urgency  to  eliminate  the  exasperating 
indifference  of  the  “  hello-girl  ”,  with  her  parrot-like  response 
of  “  busy !  ”  and  the  equally  exasperating  confusion  of  com¬ 
peting  systems.  So  far  as  gas  is  concerned,  people  have  been 
crying  for  light  enough  to  read  by,  pressure  enough  to  cook 
by,  and  less  gas  to  breathe.  In  the  supplying  of  electricity, 
clear  light  and  steady  service  have  sometimes  seemed  more 
important  than  reduced  rates.  This  demand  for  better  serv¬ 
ice  has  found  expression  in  many  elaborate  franchise  pro¬ 
visions  in  places  where  public  discontent  has  had  any  chance 
to  modify  franchises.  It  has  also  induced  a  great  amount  of 
regulation  by  law,  ordinance  and  administrative  order,  inde¬ 
pendent  of  express  franchise  provisions. 

8.  Maintaining  public  control  of  the  streets. — Growing 
out  of  these  various  attempts  to  regulate  public  service  cor¬ 
porations  by  means  of  new  conditions  in  franchise  grants 
and  otherwise,  a  settled  conviction  has  been  reached  by  a 
considerable  number  of  citizens  that  the  fundamental  ques¬ 
tion  in  relation  to  franchises  is,  not  compensation  for  the 


6 


MUNICIPAL  FRANCHISES. 


city  or  reduced  rates  to  the  consumer, — or  better  service 
even, — but  rather  the  plain  matter-of-fact  problem  of  main¬ 
taining  the  city’s  control  over  the  streets.  It  has  been  seen 
that  the  public  highways,  which  in  theory  are  open  to  every¬ 
one  on  equal  terms,  have  been  in  many  cases  so  mortgaged  to 
special  franchise  uses  as  to  render  the  “  equity  ”  in  the 
street  easements  remaining  to  the  general  public  of  indifferent 
value.  Moreover,  new  conditions  and  the  increasing  complex¬ 
ity  of  urban  life  are  constantly  multiplying  the  demands  for 
special  privileges;  and  with  the  streets  already  loaded  down 
with  vested  and  inalienable  rights,  there  has  been  insufficient 
room  even  for  these  new  special  uses.  At  this  very  time, 
June,  1909,  there  are  in  the  crowded  streets  of  Manhattan 
Island  more  than  twenty  miles  of  railroad  tracks  held  there 
by  perpetual  franchises,  although  the  operation  of  cars  has 
been  abandoned  except  for  one  or  two  trips  a  day,  which  are 
kept  up,  not  for  the  purpose  of  transporting  passengers,  but 
to  u  carry  ”  the  franchises.  In  all  underground  construction 
in  the  streets  of  the  older  cities,  a  large  proportion  of  the 
cost  is  due  to  the  necessity  of  dodging  various  pipes  and  con¬ 
duits  already  in  the  streets,  or  in  some  cases  of  actually  re¬ 
arranging  them  to  make  room  for  the  new  work.  Such  diffi¬ 
culties  as  these  have  led  to  the  application  of  a  new  test  in 
franchise  grants,  namely,  this:  Do  they  reserve  to  the  city 
undiminished,  its  right  to  control  the  streets  and  to  reappor¬ 
tion  from  time  to  time,  as  occasion  may  require,  the  spaces 
in,  over  and  under  the  highways  devoted  to  the  various 
special  uses  for  which  provision  must  be  made,  and  to  readjust 
the  relations  between  the  franchise  holders  and  the  city,  and 
among  the  franchise  holders  themselves?  In  order  to  meet 
this  test,  some  indeterminate  franchises  have  been  granted, 
while  in  other  grants,  limited  to  definite  periods,  an  attempt 
hap  been  made  to  reserve  to  the  municipality  such  complete 
authority  for  stringent  regulation  of  the  operation  of  these 
franchises  as  to  insure  adequate  and  humble  service  at  rea¬ 
sonable  rates  and  to  prevent  undue  interference  by  the  com¬ 
panies  with  the  ordinary  uses  of  the  streets. 

9.  Demand  for  municipal  ownership. — Even  indetermin¬ 
ate  franchises  and  almost  unlimited  powers  of  public  regula¬ 
tion  have  sometimes  seemed  insufficient  to  protect,  in  prac¬ 
tice,  the  rights  of  the  public.  And  so,  in  recent  years,  a 


HOW  FRANCHISE  RIGHTS  ARE  ACQUIRED. 


r 


powerful  and  wide-spread  demand  has  arisen  for  municipal 
ownership  of  public  utilities.  Some,  basing  their  argument 
on  the  apparent  inability  of  the  public  authorities  to  control 
the  highways  so  long  as  private  companies  are  permitted  to 
place  and  maintain  as  their  own  property  permanent  fixtures 
in  the  streets,  have  urged  that  street  railway  tracks,  gas 
pipes,  conduits,  poles,  wires,  etc.,  should  be  constructed  and 
owned  by  the  city  and  be  leased  for  operation  to  such  private 
parties  as  would  agree  to  furnish  the  service  on  the  best 
terms.  Others,  foreseeing  endless  trouble  between  the  city 
and  the  lessees  of  its  property  under  the  plan  of  municipal 
ownership  and  private  operation,  have  gone  the  full  length 
of  declaring  that  public  utilities  are  essentially  public  enter¬ 
prises  and  should  no  more  be  farmed  out  to  private  contract¬ 
ors  than  the  schools,  the  police  and  the  fire  service  are.  The 
advocates  of  municipal  ownership  and  operation  have  persist¬ 
ently  urged  that  only  by  following  this  policy  could  the 
people  effectually  eliminate  the  corruption,  inefficiency,  extor¬ 
tion,  stock  manipulation  and  other  evils  heretofore  attaching 
in  a  greater  or  less  degree  to  the  granting,  operation  and 
ownership  of  public  utility  franchises.  This  view  has  had  a 
marked  effect  in  recent  times  upon  the  drafting  of  franchises 
and  the  framing  of  constitutions  and  charters.  Nowadays 
it  has  become  a  common  practice  to  reserve  in  franchise 
grants  the  right  of  the  city  to  purchase  the  property  of  the 
grantee  either  at  the  expiration  of  the  grant  or,  in  some  cases, 
at  any  time. 

10.  Attitude  of  franchise  granting  authorities. — During 
the  whole  period  in  the  evolution  of  political  thought  relative 
to  public  utilities,  there  has  been  a  continuous  stream  of 
franchise  grants  by  a  multiplicity  of  authorities,  ranging 
from  the  state  legislature  to  the  highway  commissioner  of  the 
rural  township.  These  franchises  are  many  of  them  per¬ 
petual,  some  of  them  indeterminate,  and  others  for  periods 
ranging  from  10  to  999  years.  As  a  rule,  no  thoroughly  con¬ 
sistent  policy  has  been  followed  in  any  city  in  regard  to  any 
single  public  utility.  Much  less,  therefore,  has  there  been 
any  consistent  policy  in  the  country  at  large  with  reference 
to  all  public  utilities.  Aside  from  the  various  changes  in 
the  public  attitude  toward  franchises,  which  I  have  already 
described,  the  most  potent  factor  in  this  confusion  of  grants 


8 


MUNICIPAL  FRANCHISES. 


has  been  the  inefficiency  of  aldermen  and  legislators  and  their 
misconception  of  their  functions.  Uusually  the  alderman 
has  looked  upon  himself  as  a  lord  of  privileges,  one  to  whom 
it  has  been  given  to  grant  or  refuse  the  petitions  of  his  con¬ 
stituents  and  others  desiring  to  do  business  in  the  streets  of 
his  jurisdiction.  Reflecting  in  his  own  political  character 
the  dearth  of  intelligent  civic  spirit  among  his  constituents, 
and  failing  to  grasp  the  necessity  of  a  consistent  public  policy 
relative  to  street  utilities  and  other  problems  of  city  life,  he 
has  remained  ignorant  and  incapable  of  constructive  civic 
statesmanship.  Flattered  by  the  attentions  of  the  courtly 
agents  of  corporate  wealth  and  proud  of  his  petty  sovereignty, 
he  has  been  only  too  glad  to  grant  what  franchise  seekers 
have  asked.  Or  it  may  be  that,  responding  to  blind  demands 
on  the  part  of  his  constituents,  he  has  insisted  on  cumbering 
up  franchises  with  illogical  and  impractical  restrictions  whose 
only  effect  is  to  harass  the  companies  and  make  for  poorer 
service. 

11.  Franchises  drafted  by  those  who  seek  them.— 

An  alderman  seldom  has  had  sufficient  experience  and  legal 
training  to  prepare  a  franchise  himself,  and  in  the  absence  of 
some  consistent  theory  of  franchise  policy,  he  has  permitted 
the  attorneys  for  public  service  corporations  to  draft  the  fran¬ 
chises  they  wanted  and  present  them  to  him  for  his 
approval.  The  result  has  been  that  in  every  city  public  fran¬ 
chises  are  a  mass  of  ordinances  and  contracts,  most  of  which 
were  drawn  by  different  and  sometimes  conflicting  private 
interests  and  with  insufficient  regard  for  the  general  inter¬ 
ests  of  the  public.  It  is  likely  to  take  an  expert  a  long  time, 
perhaps  several  months,  to  see  all  the  things  that  are  not  in 
a  franchise.  How  certain,  then,  it  has  been  that  an  aider- 
man  who  knew  nothing  but  ward  politics,  would  look  at  an 
attorney’s  franchise  draft  containing  a  few  high-sounding 
legal  phrases,  and  pronounce  the  document  good.  It  is  one  of 
the  tricks  of  the  public  service  corporation  lawyer,  to  draft 
a  franchise  for  his  client  so  that  the  powers  of  regulation  of 
which  the  city  could  not  be  deprived  in  any  case  appear  to  be 
reserved  to  the  public  authorities  in  the  most  explicit  terms, 
and  this  reservation  is  pointed  out  to  prove  how  liberal  to  the 
city  the  company’s  proposition  is.  When  public  opinion  has 
reached  such  a  state  that  the  corporation  asking  for  a  fran- 


HOW  FRANCHISE  RIGHTS  ARE  ACQUIRED. 


9 


chise  foresees  the  necessity  of  making  concessions  on  points 
concerning  which  franchises  are  usually  silent,  the  expert 
attorney  introduces  clauses  making  extraordinary  reserva¬ 
tions  to  the  city,  which  further  on  in  the  franchise  are  so 
limited,  checked  and  modified  as  to  be  in  reality  worthless 
from  the  public  standpoint.  A  few  weasel  words  judiciously 
distributed  at  strategic  points,  a  few  omissions  easily  over¬ 
looked  in  the  ensemble  of  technical  phrases,  a  few  fair¬ 
sounding  reservations  upon  which  lawsuits  in  the  Federal 
courts  may  be  based,  are  likely  to  vitiate  any  franchise  ordi¬ 
nance  or  contract  drafted  by  lawyers  who  are  paid  to  outwit 
the  city. 

12.  Public  authorities  negotiate  in  the  dark. — It  is 

not  necessary  to  accuse  aldermen  of  extraordinary  ignorance, 
of  dishonesty,  or  even  of  a  natural  bent  to  favor  corporate 
interests.  These  public  officials  have  shared  with  the  great 
majority  of  the  business  and  professional  men  of  the  cities, 
profound  incompetence  for  dealing  with  franchise  questions 
from  the  standpoint  of  a  consistent  public  policy.  The  cor¬ 
porations  asking  for  franchises  have  had  all  the  knowledge 
and  experience  of  the  business.  Until  very  recently  there  has 
been  practically  no  publicity  of  public  service  corporation 
accounts.  Even  in  those  cases  in  which  the  books  of  the 
companies  have  been  open  either  to  the  city’s  financial  officer 
or  to  other  accountants  for  the  purpose  of  determining  the 
amount  of  gross  receipts  upon  which  the  companies  were  re¬ 
quired  to  pay  a  tax,  no  real  light  has  been  thrown  upon  the 
essentials  of  corporate  finance.  Access  to  the  books  showing 
investment  and  cost  of  service  has  been  denied,  or  double 
sets  of  books  and  the  intricacies  of  accounting  have  con¬ 
cealed  the  most  essential  facts.  In  the  larger  cities  public 
service  corporation  managers  have  frequently  been  so  deeply 
engaged  in  financial  jugglery  and  the  manipulation  of  the 
stock  market  that  they  themselves  have  been  more  or  less  in 
the  dark  as  to  the  exact  status  of  the  business  enterprises 
for  which  they  were  nominally  responsible.  And  so,  when 
franchise  negotiations  have  been  pending,  the  officers  repre¬ 
senting  the  city  have  had  nothing  to  base  their  claims  upon 
except  the  desires  of  the  public,  and  any  statistics  voluntarily 
furnished  by  the  other  parties  to  the  negotiations  have  been 
ex  parte  evidence,  with  no  guaranty  of  proper  book-keeping. 


10 


MUNICIPAL  FRANCHISES. 


13.  Aldermen  have  not  had  expert  advice. — Even  the 
facts  that  could  be  ascertained  in  regard  to  franchises  and 
public  service  corporations,  have  usually  been  unknown  to 
the  municipal  authorities.  There  has  been  no  city  official 
whose  duty  it  was  to  collect  data  and  become  expert  in  fran¬ 
chise  matters.  Every  new  application  for  a  franchise  has 
found  the  city  officials  unprepared  with  the  requisite  knowl¬ 
edge.  Each  city  has  handled  franchise  questions  blindly  and 
with  little  or  no  regard  to  the  experience  of  other  cities. 
Indeed,  a  city’s  own  experience  has  seldom  been  fully  avail¬ 
able  for  the  guidance  of  the  aldermen.  Even  now  in  many 
cities,  including  some  of  the  greatest,  there  is  no  compilation 
of  existing  franchise  rights.  New  York  City  had  four 
million  inhabitants  before  it  established  a  bureau  for  the 
purpose  of  ascertaining  the  rights  of  the  public  service 
corporations  already  in  the  field  and  of  being  prepared  to 
handle  intelligently  the  applications  of  new  companies  for 
franchise  rights.  The  confusion  and  ignorance  regarding 
franchises  are  almost  as  great  proportionally  in  the  smaller 
cities. 

14.  Franchises  granted  directly  by  the  legislature.— 

Confusion  results  from  several  conditions  in  addition  to  those 
already  described.  It  is  the  theory  of  American  law  that  the 
control  of  the  streets  rests  in  the  state  legislature  unless  it 
has  been  delegated  by  constitution  or  statute  to  the  local 
authorities.  On  this  account  it  often  happened  in  the  earlier 
days  of  franchise  granting  that  the  state  legislatures  passed 
special  acts  incorporating  various  companies  and  giving  them 
specific  rights  in  the  streets  of  individual  cities.  These  legis¬ 
lative  grants  were  even  less  consistent  and  less  intelligent 
than  the  grants  made  by  the  cities  themselves  under  delegated 
authority.  Sometimes  conflicting  grants  were  made  by  the 
state  and  local  authorities,  owing  to  a  lack  of  clearness  re¬ 
garding  their  respective  powers.  In  many  cases  franchises 
were  granted  without  a  time  limit  and  were  afterward  held 
by  the  courts  to  be  perpetual.  In  some  cases  the  grants  were 
made  subject  to  the  right  of  amendment  or  repeal  by  the 
legislature.  But  this  right  has  frequently  been  lost  by  neg¬ 
lect  or  judicial  “interpretation.”  Often  the  legislature  has 
confirmed  or  modified  local  grants,  or  made  exceptions  in 
favor  of  particular  companies.  Sometimes  local  regulations 


HOW  FRANCHISE  RIGHTS  ARE  ACQUIRED. 


11 


have  been  overruled  by  legislative  action,  and  occasionally 
the  legislature  has  tried  to  evade  constitutional  restrictions 
upon  its  power  for  the  purpose  of  establishing  the  rights  and 
privileges  of  favored  companies. 

15.  Franchise  rights  under  general  laws. — In  addition 
to  special  acts  of  the  legislature,  conferring  rights  upon 
individual  companies,  there  have  been  passed  in  many  states 
general  laws  regulating  the  use  of  the  streets,  which  have  been 
interpreted  as  being  equivalent  to  general  franchises.  Usu¬ 
ally  such  acts  apply  to  telegraph  and  telephone  companies  or 
electric  light  companies.  Occasionally  they  apply  to  gas  and 
water  companies.  Even  where  these  general  laws  do  not 
constitute  franchise  rights  unless  the  consent  of  the  local 
authorities  is  also  obtained,  there  is  often  a  serious  question 
as  to  whether  the  city,  in  giving  its  consent,  is  authorized  to 
impose  conditions  upon  the  companies  in  addition  to  the  con¬ 
ditions  contained  in  the  general  statute.  Sometimes  all  the 
authority  which  the  locality  has,  is  to  designate  the  particu¬ 
lar  streets  which  may  be  used  by  the  company  exercising  its 
franchise  under  the  law  of  the  state.  In  other  cases,  where 
the  effect  of  the  general  law  is  somewhat  doubtful,  companies 
often  prefer  to  seek  or  accept  local  franchises  with  various 
conditions  attached,  even  though  there  is  doubt  as  to  whether 
such  franchises  are  required.  In  any  case,  except  where  the 
general  law  is  explicit,  confusion  and  uncertainty  arise  as  to 
the  powers  of  the  local  authorities  and  the  rights  of  the 
franchise  companies.  Public  utility  companies  often  oper¬ 
ate  for  many  years  without  having  these  doubtful  points 
cleared  up,  so  that  at  any  particular  time  no  one  can  be 
certain,  even  after  careful  investigation,  of  the  exact  status  of 
their  franchise  rights. 

16.  Property  owners1  consents  and  private  rights  of  way.— 

In  many  cases  franchise  grants  have  been  made  condi¬ 
tional  upon  the  consent  of  persons  owning  property  along 
the  street.  The  law  requiring  property  owners’  consents  dif¬ 
fers  in  the  different  states  in  which  this  system  is  in  force. 
In  New  York  the  consent  of  the  owners  of  a  majority  in  in¬ 
terest  along  each  street  to  be  traversed  by  the  street  railway 
line  is  required,  or,  in  lieu  of  such  consent,  the  company  may 
apply  to  the  courts  for  an  order  authorizing  the  construction 
of  the  road.  There  are  provisions  of  the  railroad  law  re- 


12 


MUNICIPAL  FRANCHISES. 


quiring  franchises  to  be  used  within  a  certain  number  of 
years  after  they  have  been  obtained.  Inasmuch,  however, 
as  the  franchise  is  not  complete  until  the  consent  of  the 
property  owners  or  of  the  court  has  been  acquired,  it  is  often 
a  matter  of  doubt  as  to  when  the  franchise  granted  by  local 
authorities  may  be  forfeited  for  non-user.  In  some  cases  the 
forfeiture  clause  of  the  law  is  self-executing;  in  other  cases 
the  franchises  are  not  forfeited  unless  an  action  is  brought 
by  the  proper  public  official  to  have  them  declared  void.  No 
particular  method  of  securing  the  consents  of  property  own¬ 
ers  has  been  prescribed  in  New  York.  It  has  been  required 
for  some  years,  however,  that  copies  of  these  consents  should 
be  filed  in  a  public  office.  The  condition  of  the  public 
records  and  the  difficulty  of  determining  at  a  later  period 
just  what  constituted  the  requisite  consents  for  a  particular 
street,  surround  many  franchise  grants  now  in  use  with  con¬ 
siderable  uncertainty.  In  cases  where  a  company  has  built  a 
part  of  its  franchise  route  within  the  prescribed  time,  but  has 
failed  to  build  the  rest,  it  may  claim  that  it  could  not  secure 
the  requisite  property  owners’  consents,  and  in  any  action  to 
forfeit  its  franchise  rights  it  is  difficult  for  the  public  au¬ 
thorities  to  establish  the  facts  relative  to  such  consents.  In 
Ohio  the  law,  until  recently,  required  a  renewal  of  consents 
on  any  street  where  a  new  company  proposed  to  operate  in 
place  of  an  existing  company. 

In  many  ways  the  consent  law  has  added  complexity  and 
confusion  to  franchise  granting  and  has  rendered  it  difficult 
to  determine  at  any  particular  time  the  precise  status  of  fran¬ 
chise  rights  in  the  streets. 

In  the  suburbs  of  large  cities  it  frequently  happens  that 
street  railways  have  been  built  upon  private  rights  of  way 
acquired  from  old  turnpike  companies  or  secured  by  special 
arrangement  with  the  owners  of  surburban  lands.  When 
turnpike  roads  upon  which  street  railways  have  already  been 
laid,  are  converted  into  public  highways,  the  status  of  the 
street  railway  companies  is  often  in  doubt,  especially  as  re¬ 
gards  their  obligation  to  maintain  their  roadbed  and  keep  the 
streets  clean  and  in  repair. 

17.  Franchise  grants  by  administrative  departments. — 

While  it  is  true  that  the  legislature,  barring  special  constitu¬ 
tional  restrictions,  is  the  authority  having  control  of  all 


HOW  FRANCHISE  RIGHTS  ARE  ACQUIRED. 


13 


public  highways  of  the  state,  and  while  it  is  also  true  that 
where  the  power  to  grant  franchises  or  to  consent  to  their 
exercise  is  delegated  to  the  local  authorities,  the  city  council 
is  ordinarily  held  to  be  the  municipal  body  with  which  this 
power  rests,  there  are,  nevertheless,  numerous  cases  in  which 
franchise  rights  are  obtained  in  other  ways.  For  parkways, 
boulevards  and  roads  or  streets  running  through  parks,  the 
park  department  is  often  the  franchise  granting  authority. 
Over  bridges  this  power  is  sometimes  exercised  by  the  ad¬ 
ministrative  department  having  control  of  bridges.  Some¬ 
times  terminal  rights  at  public  piers  are  under  the  control  of 
the  special  authority  having  charge  of  a  city’s  docks  and 
wharves.  In  this  way  it  happens  that  in  the  same  city  com¬ 
panies  may  be  exercising  franchises  granted  by  different  local 
authorities,  whose  records  are  kept  in  different  places  and 
either  not  published  at  all  or  published  in  separate  reports. 
Furthermore,  on  various  occasions,  when  old  suburban  roads 
are  superseded  by  city  streets,  or  when  bridges  are  removed 
or  other  changes  are  made  in  the  structures  used  by  street 
railways,  permits  are  issued  by  the  administrative  authority 
having  control  of  the  streets  for  locations  not  exactly  cov¬ 
ered  by  the  franchises  of  a  company.  In  these  various  ways 
franchise  rights  are  obtained  without  the  usual  publicity  and 
deliberation. 

18.  Franchises  granted  by  suburban  districts. — The  con¬ 
fusion  as  to  franchise  periods  and  franchise  conditions  has 
been  greatly  increased  by  the  rapid  growth  of  cities  and  the 
consequent  annexation  of  suburban  districts  which  had  already 
given  franchises  on  different  terms  and  to  different  com¬ 
panies.  With  the  enlargement  of  the  city,  all  of  these  grants 
by  suburban  communities  become  a  part  of  the  city’s  fran¬ 
chises.  The  records  in  the  case  of  suburban  towns  and 
villages  are  often  more  imperfectly  kept  than  in  the  case  of 
the  cities  themselves.  It  has  been  the  practice,  especially  of 
street  railway  companies  in  large  cities,  to  seek  and  secure, 
often  by  doubtful  means,  long-term  franchise  grants  from 
outlying  towns  and  villages  shortly  before  their  annexation. 
In  such  cases  the  proceedings  are  frequently  hurried,  irregu¬ 
lar  and  more  or  less  secret.  In  the  confusion  attendant  upon 
annexation  and  the  supplanting  of  the  old  local  authority  by 
a  central  power  which  is  occupied  with  bigger  problems, 


14 


MUNICIPAL  FRANCHISES. 


these  grants,  regarded  as  comparatively  petty  at  the  time, 
go  unchallenged;  or,  if  challenged,  the  issue  is  not  carried 
through  to  a  conclusion.  In  the  meantime  the  company, 
knowing  that  “  possession  is  nine  points  in  the  law,”  takes 
possession. 

19.  Influence  of  territorial  expansion  upon  city  fran¬ 
chises. — In  addition  to  being  plagued  by  franchises  granted 
in  suburban  districts  afterwards  annexed,  cities  are  some¬ 
times  troubled  by  the  effect  of  territorial  expansion  upon 
the  rights  and  obligations  of  the  companies  already  operating 
in  the  city  under  city  franchises.  In  the  case  of  street  rail¬ 
ways,  where  grants  are  usually  made  for  specific  streets,  the 
question,  “  Does  the  franchise  follow  the  flag  ?  ”  is  not  likely 
to  arise.  In  the  case  of  gas,  water,  telephone,  and  electric 
light  companies,  however,  it  is  often  contended  with  con¬ 
siderable  plausibility  that,  having  been  granted  the  right  to 
occupy,  generally,  the  streets  of  the  city,  they  are  entitled  to 
exercise  similar  rights  in  the  streets  of  any  new  district  that 
may  be  annexed  to  it.  It  is  readily  seen  that  this  becomes  a 
question  of  grave  importance  in  the  case  of  cities  which  are 
growing  rapidly.  In  the  natural  course  of  events,  if  a  fran¬ 
chise  follows  the  growth  of  the  city,  it  will  often  cover  a 
very  much  larger  territory  after  a  few  years  than  when  it 
was  first  granted.  Furthermore,  if  suburban  franchises  have 
been  granted  to  other  companies,  there  is  likely  to  arise  a 
conflict  of  “  jurisdiction  ”  as  the  city  expands  and  the  com¬ 
panies  operating  within  its  limits  reach  out  to  extend  their 
operations  to  the  newly  acquired  territory. 

20.  Franchise  grants  conditioned  upon  formal  accept¬ 
ance  or  other  specific  acts  of  the  grantees. — It  is  quite 
usual  to  require  the  individual  or  company  to  which  a  fran¬ 
chise  is  granted  to  file  a  written  acceptance  of  the  terms  and 
conditions  of  the  grant  within  a  prescribed  period.  In  other 
cases  the  grantee  is  required  to  file  a  bond  to  protect  the 
city  from  damages  that  may  result  from  the  exercise  of 
the  franchise.  Frequently,  also,  the  grantee  is  required  to 
commence  work  on  the  proposed  plant,  or  to  complete  con¬ 
struction,  within  a  specified  time,  on  penalty  of  the  for¬ 
feiture  of  the  franchise  in  case  of  failure.  The  records 
showing  the  fulfilment  of  the  various  conditions  upon  which 
franchises  have  been  granted  are  in  many  cases  imperfect  or 


HOW  FRANCHISE  RIGHTS  ARE  ACQUIRED. 


15 


entirely  lacking.  It  is  possible  that  a  company  may  have 
been  operating  a  public  utility  for  many  years  under  a  fran¬ 
chise  that,  according  to  its  terms,  never  went  into  effect  at 
all,  owing  to  the  failure  of  the  grantee  to  fulfil  the  conditions 
contained  in  the  grant. 

21.  Franchises  by  “  acquiescence.*’ — When  companies 
have  long  occupied  the  streets  for  the  purpose  of  distributing 
gas  or  electricity  or  transporting  passengers  or  supplying 
water,  with  the  acquiescence  of  the  municipal  authorities,  it 
is  claimed  that  the  companies  have  acquired  rights  of  which 
they  cannot  be  deprived  arbitrarily,  even  though  their  fran¬ 
chises  were  not  valid  originally,  or  have  expired  long  ago. 
Where  the  law  requires  an  elaborate  procedure  in  the  grant¬ 
ing  of  franchises,  it  is  possible  that  after  the  grant  has  once 
been  made  and  the  conditions  fixed,  the  public  authorities 
charged  with  the  duty  of  protecting  the  common  interests 
may,  by  neglect,  modify  the  terms  of  the  franchise  and  virtu¬ 
ally  give  to  the  company,  either  by  collusion  or  by  simple 
carelessness,  privileges  which  could  not  have  been  granted 
originally.  According^,  it  is  possible  that  the  wording  of  the 
terms  of  an  old  franchise  may  not  give  an  accurate  idea  of 
the  actual  privileges  and  obligations  now  attaching  to  its  use. 
It  may  be  necessary  to  know  in  detail  the  history  of  the  rela¬ 
tions  of  the  franchise  holder  with  the  administrative  authori¬ 
ties  from  the  time  when  the  franchise  was  first  granted.  It 
may  be  that  the  company  has  been  relieved,  by  later  ordi¬ 
nances,  resolutions,  or  simple  “  understandings  ”,  from  the 
strict  fulfilment  of  some  of  its  franchise  obligations. 

22.  Exclusive  franchises.  —  Although  experience  and  re¬ 
flection  unite  to  show  that  public  utilities  are  essentially 
monopolies  and  that  competitive  franchises  have  a  strong 
tendency  to  be  consolidated,  the  ancient  antipathy  of  the  peo¬ 
ple  to  monoply  in  any  form,  and  the  fear  that  a  public  utility 
legally  established  as  a  monopoly  would  be  especially  difficult 
to  regulate,  have  resulted  in  the  enactment  of  constitutional 
provisions  in  various  states  forbidding  the  grant  of  exclusive 
franchises.  Where  such  a  provision  is  not  found  in  the  con¬ 
stitution,  it  may  be  included  in  the  laws  of  the  state  by  which 
franchise  granting  authority  is  delegated  to  the  localities,  or 
it  may  be  made  a  part  of  the  municipal  charter  enacted  by  the 
people  in  those  states  in  which  home  rule  charters  prevail. 


16 


MUNICIPAL  FRANCHISES. 


Even  in  the  absence  of  specific  prohibitions,  there  is  grave 
doubt  as  to  the  authority  of  public  officials  to  grant  exclusive 
privileges  in  the  streets.  Nevertheless,  city  councils  have 
often  attempted  to  make  such  grants.  Sometimes  a  grant 
has  been  made  exclusive  for  a  limited  period,  after  which  it 
should  be  open  to  competitive  grants.  It  may  be  that  after 
a  council  has  attempted  to  grant  an  exclusive  franchise,  a 
succeeding  council,  believing  the  exclusive  feature  of  the 
grant  to  be  invalid,  has  given  similar  privileges  to  other  com¬ 
panies.  The  result  has  been  confusion  and  uncertainty  as 
to  the  status  of  both  the  old  and  the  new  companies. 

23.  Franchises  that  do  not  expire  when  their  time  is 
up.  — If  “  a  cat  has  nine  lives  ”  it  may  be  safely  said  that  a 
franchise  has  as  many.  Franchises  seldom  die  on  schedule 
time.  When  an  exclusive  grant  is  made  for  a  certain  num¬ 
ber  of  years,  at  the  expiration  of  the  term  it  is  sometimes 
claimed  that  wdiile  the  exclusive  feature  of  the  grant  is  ter¬ 
minated,  the  grant  itself  goes  on  in  perpetuity.  Or  if  the 
right  to  lay  down  fixtures  in  the  streets  for  a  specific  period 
is  granted,  the  owner  of  the  fixtures  may  claim  that  after 
the  expiration  of  the  period,  although  he  is  not  entitled  to 
lay  down  any  additional  fixtures,  he  at  least  has  the  right  to 
maintain  and  operate  those  already  laid  without  regard  to 
the  time  limit.  The  theory  is  sometimes  advanced  that  a 
limited  term  franchise,  even  where  the  company’s  corporate 
life  is  limited  by  its  state  charter,  is  only  an  agreement  fix¬ 
ing  the  particular  terms  and  conditions  under  which  the  pub¬ 
lic  utility  is  to  be  supplied  during  the  period  mentioned, 
while  thereafter  the  company  or  its  successor,  has  the  right 
to  continue  the  business  under  a  readjustment  of  terms,  or 
in  case  of  inability  to  agree  with  the  city  on  a  new  contract, 
then  subject  to  reasonable  regulation  and  at  fair  rates.  In¬ 
deed,  unless  a  franchise  specifically  provides  what  shall  be  done 
writh  the  fixtures  in  the  streets  at  the  expiration  of  the  grant, 
the  life  of  the  franchise  is  likely  to  be  prolonged  by  sheer 
force  of  circumstances.  Public  necessities  will  not  permit 
the  operation  of  the  utility  plant  to  cease  and  the  courts,  in 
their  role  of  defenders  of  property,  will  be  very  slow  to  order 
a  system  of  pipes,  wires  or  tracks  to  be  torn  up  and  made 
into  scrap. 

24.  Franchises  granted  to  different  companies.  — Still 


HOW  FRANCHISE  RIGHTS  ARE  ACQUIRED. 


17 


another  source  of  confusion  has  been  the  granting  of  fran¬ 
chises,  at  different  times  and  on  different  conditions,  to  dif¬ 
ferent  companies.  Even  where  there  is  no  claim  that  any 
franchise  grant  is  exclusive  and  no  doubt  as  to  the  validity  of 
the  various  grants  made  by  the  public  authorities,  still  there 
remains  the  confusion  resulting  from  the  use  of  the  same 
streets  by  fixtures  of  the  same  class  but  belonging  to  different 
owners.  Indeed,  sometimes  the  ownership  of  particular  fix¬ 
tures  is  not  clearly  identified.  This  difficulty  becomes  greater 
where  the  rights  granted  to  competing  companies  cannot  be 
exercised  independently  by  all  the  grantees.  In  such  cases 
there  is  often  a  keen  rivalry  between  companies  to  get  their 
fixtures  placed  in  the  streets  first,  or  at  least  to  get  possession 
of  the  strategic  points  first.  This  rivalry  has  often  been  the 
occasion  of  private  wars,  in  which  gangs  of  men  representing 
different  interests  have  battled  in  the  streets  as  if  they  were 
the  retainers  of  hostile  feudal  lords.  Occasionally  different 
companies  having  the  right  to  use  the  same  streets  are  re¬ 
quired  to  build  and  maintain  the  tracks  or  other  fixtures  in 
common.  Sometimes  the  company  first  making  use  of  its 
franchise  is  required  to  permit  other  companies  to  use  its 
fixtures  on  the  payment  of  a  rental.  The  status  of  a  fran¬ 
chise  right  which  the  owner  has  exercised  only  through  the 
use  of  another  company’s  fixtures  placed  there  under  another 
franchise,  may,  after  the  lapse  of  time,  fall  into  a  doubtful 
condition,  especially  if  the  company  whose  fixtures  have  been 
in  the  street,  should  remove  them. 

25.  Competing  franchises  absorbed  by  a  single  com¬ 
pany. — The  confusion  increases  where,  through  a  process  of 
merger  and  consolidation,  the  property  and  franchises  of  a 
large  number  of  companies,  originally  competitors,  are  ab¬ 
sorbed  by  a  single  operating  company.  In  such  a  case  it 
frequently  happens  that  different  gas  pipes  or  electric  light 
mains,  located  in  the  same  streets  and  owned  and  operated 
by  the  same  company,  are  held  under  different  franchises. 
The  consolidated  company,  as  it  renews  its  fixtures  and  ex¬ 
tends  its  lines,  may  claim  to  operate  under  any  one  of  the 
franchises  secured  by  it  from  its  constituent  companies.  It 
is  an  actual  occurrence  in  many  cities,  that  great  public  util¬ 
ity  corporations,  owning  numerous  franchises  running  for 
different  periods  and  subject  to  different  conditions,  are  oper- 


18 


MUNICIPAL  FRANCHISES. 


ating  as  monopolies  without  the  city’s  being  able  to  ascertain 
under  what  particular  franchise  or  franchises  operation  is 
being  carried  on.  Naturally,  the  pipes,  wires  and  tracks  of 
the  constituent  companies  are  gradually  replaced  by  new 
fixtures  and  become  commingled  so  that  the  traces  of  the  orig¬ 
inally  separate  systems  covered  by  the  different  franchises, 
are  lost.  The  condition  is  in  no  wise  simplified  when  the 
operating  company,  instead  of  absorbing  the  original  com¬ 
panies  by  merger,  simply  leases  their  property  and  franchises 
for  a  fixed  period  or  in  perpetuity.  Although  New  York 
City  and  Brooklyn  have  perhaps  furnished  the  most  notable 
examples  of  the  utter  confusion  arising  from  the  piling  up 
of  leases,  mergers  and  consolidations  in  the  street  railway, 
electric  lighting  and  gas  industries,  conditions  have  been  al¬ 
most  as  bad  in  practically  every  large  American  city. 

23.  Franchises  expiring  at  different  periods. — One  of 
the  most  exasperating  conditions  which  the  large  cities  have 
had  to  face  in  negotiating  new  franchise  settlements,  has  been 
the  fact  that  franchises  for  the  same  utility  held  by  the  same 
company,  expire  at  different  times.  This  condition  operates 
to  the  advantage  of  the  company  seeking  a  renewal  of  fran¬ 
chises,  for  the  reason  that  the  city  cannot  readily  take  over 
the  system  piecemeal  or  get  any  competing  company  to  bid 
on  that  basis.  The  city  cannot  take  away  the  unexpired 
portions  of  the  existing  company’s  franchises,  and  the  system 
must  be  operated  as  a  unit.  The  convenience  of  the  public 
demands  that  operation  shall  be  uninterrupted.  Public  serv¬ 
ice  companies  have  not  failed  to  see  the  advantage  to  be  de¬ 
rived  by  them  from  franchises  that  are  not  coterminous. 
The  companies,  therefore,  have  a  powerful  motive  to  take 
advantage  of  the  various  circumstances  already  described, 
which  lead  to  confusion  in  franchise  grants.  Indeed,  if  the 
concessions  exacted  by  the  companies  in  new  franchise  negoti¬ 
ations  on  the  strength  of  the  possession  of  unexpired  fag 
ends  of  ancient  grants  could  be  catalogued,  it  would  make  a 
startling  demonstration  of  the  folly  of  cities  in  ever  letting 
slip  franchises  for  the  same  utility  that  do  not  expire  at  one 
time. 

27.  Franchises  subject  to  different  conditions — Not  onlv 

f  V 

are  franchises  granted  to  different  companies  and  to  the 
same  company  for  different  periods,  but  they  are  granted  on 


HOW  FRANCHISE  RIGHTS  ARE  ACQUIRED. 


19 


different  conditions.  One  company  may  be  taxed  on  gross 
receipts  alone,  while  another  pays  only  the  regular  property 
tax.  One  street  railway  grant  may  require  the  sale  of  eight 
tickets  for  a  quarter,  while  another  line  in  the  same  city  is 
permitted  to  charge  a  straight  five  cent  fare.  One  company 
may  have  to  pave  between  its  tracks,  while  another  on  an 
adjoining  street  is  exempt  from  paving  obligations.  With 
the  changes  in  public  sentiment  and  the  conditions  surround¬ 
ing  the  operations  of  the  public  utilities, — yes,  even  with  the 
varying  whims  or  interests  of  the  franchise  committee  of  the 
board  of  aldermen — the  conditions  attached  to  franchise 
grants  have  varied  from  year  to  year  and  from  company  to 
company.  Some  of  the  electric  light  franchises  granted  by 
the  towns  and  villages  on  Staten  Island  before  their  con¬ 
solidation  with  New  York  City,  required  the  company  to 
furnish  free  lights  to  churches.  Other  electric  franchises 
now  in  force  in  New  York  require  the  companies  to  pay  the 
city  one  cent  per  lineal  foot  of  streets  torn  up  to  lay  their 
wires ;  but  now  that  the  wires  are  shoved  into  conduits  under 
the  streets  from  the  manholes,  what  becomes  of  the  city’s  one 
cent  per  foot?  Some  of  the  village  franchises  required  that 
the  price  of  light  should  be  no  higher  than  that  in  vogue  in 
certain  neighboring  villages,  without  specifying  the  rates. 
Some  franchises  provide  for  one  free  public  arc  light  for 
every  fifty  commercial  arc  lights  supplied  by  the  companies ; 
and  the  companies  now  claim  exemption  from  this  require¬ 
ment  on  the  ground  that  they  no  longer  supply  arc  lights, 
but  only  current.  When  a  company  is  operating,  through 
consolidation,  under  several  franchises  having  different  con¬ 
ditions,  who  is  to  tell  how  much  it  operates  under  each  par¬ 
ticular  grant?  In  negotiations  between  the  city  and  the 
company,  the  latter  will  claim  the  advantages  of  its  most 
favorable  franchise,  and  will  probably  win  concessions  on 
the  strength  of  this  claim. 

28-  Extensions  sought  hy  the  companies — It  often  hap¬ 
pens  that  an  operating  street  railway  company  is  anxious  to 
secure  a  particular  extension,  not  because  there  is  any  strong 
demand  for  the  immediate  extension  of  its  service,  but  be¬ 
cause  it  desires  to  occupy  all  the  strategical  points  for  the 
purpose  of  rendering  competition  impossible.  The  most 
noteworthy  cases  of  this  kind  occur  where  there  is  only  one 


20 


MUNICIPAL  FRANCHISES. 


entrance  to  a  city  available  for  internrban  railroads  coming 
from  a  particular  direction,  or  where  there  are  only  certain 
limited  sources  of  water  power  available  for  generating  elec¬ 
trical  energy  to  supply  a  city  or  district.  In  such  cases,  if 
the  coveted  franchises  are  granted,  important  concessions 
may  be  wrung  from  the  company  in  regard  to  rates  or  serv¬ 
ice  or  surrender  of  existing  rights.  The  city  may  not  realize 
the  strategical  importance  of  the  grant  it  is  making  and  may 
afterwards  discover  that  the  concessions  it  has  secured  have 
been  purchased  at  an  exorbitant  price.  The  franchise  policy 
of  the  city  may  be  handicapped  for  all  time  to  come  by  what 
seemed  at  the  time  an  unimportant  grant. 

29.  Extensions  demanded  by  the  public. — It  is  an  en¬ 
tirely  different  story,  though  the  ultimate  results  may  be  much 
the  same,  when  it  is  the  public,  not  the  company,  that  seeks 
the  extension.  Then  the  company  holds  off,  says  that  the 
extension  would  not  be  profitable  and  refuses  to  make  it.  But 
real  estate  men  whose  land  is  awaiting  development,  or  the 
people  already  living  in  the  district  adjacent  to  the  desired 
extension,  are  clamoring.  Then  strong  pressure  is  brought 
to  bear  on  the  aldermen  to  offer  liberal  terms  with  the  new 
franchise,  or  even  to  give  up  some  advantages  the  city  enjoys 
under  existing  ones,  in  order  to  induce  the  company  to  extend 
its  lines.  This  introduces  another  complication  that  tends 
to  neutralize  the  effect  of  any  intelligent  thinking  the  aider- 
men  may  have  done  concerning  the  theory  of  franchise  grant¬ 
ing,  as  well  as  the  effect  of  any  facts  they  may  have  collected 
from  the  experience  of  other  cities.  Immediate  local  inter¬ 
ests,  with  a  real  estate  boom  at  stake,  have  a  strong  tendency 
to  take  the  bit  in  their  teeth  and  trample  roughshod  over  the 
general  interests  of  the  larger  community.  So  prudence  and 
courage  may  be  cast  to  the  winds  and  franchises  may  be 
granted  without  any  intelligent  regard  to  past  or  future 
policies  of  the  city. 

30.  Renewal  of  franchises  before  the  expiration  of  ex¬ 
isting  grants. — When  companies  need  to  issue  new  bonds  for 
reconstruction  or  extensions,  they  sometimes  feel  the  need  of 
new  franchises,  even  though  the  ones  they  have  do  not  expire 
for  ten  or  fifteen  years.  Or  it  may  be  that  without  any  neces¬ 
sity  except  the  desire  to  secure  themselves  and  their  property 
as  far  ahead  as  possible,  they  begin  maneuvering  for  renewals. 


HOW  FRANCHISE  RIGHTS  ARE  ACQUIRED. 


21 


It  is  at  such  opportune  times  that  the  companies  enter  poli¬ 
tics  by  the  back  door  and  endeavor  secretly  to  elect  friendly 
aldermen  when  the  franchise  question  is  not  at  issue  before 
the  people.  Then  the  city  wakes  up  some  morning  to  find 
that  its  position  has  been  rendered  untenable  by  a  flank  move¬ 
ment.  With  the  company  asking  for  a  new  franchise  to  its 
own  liking  and  the  company’s  aldermen  anxious  to  meet  its 
desires,  good  public  policy  may  be  disregarded,  and  any  cam¬ 
paign  before  the  people  on  franchise  questions  may  be 
avoided,  by  keeping  the  expiration  of  the  grants  continuously 
at  a  distant  point  in  the  future.  Franchises,  like  legislative 
measures,  receive  no  real  consideration  on  their  merits  when 
the  minds  of  the  aldermen  or  legislators  are  on  something 
else.  When  every  point  gained  for  the  public  interests  is  a 
concession  on  the  part  of  the  aldermen,  these  points  are  likely 
to  be  few  and  unimportant,  or  at  least  are  likely  to  be  check¬ 
mated  by  other  points  eagerly  given  to  the  company.  When 
the  lawyers  on  both  sides  of  a  case  want  it  decided  in  the 
same  wav,  they  generallv  carry  their  point. 

31.  Franchises  modified  by  judicial  interpretation. — 
Every  franchise,  like  every  law,  gets  its  final  interpretation 
from  the  courts.  If  the  city  reserves  the  right  to  purchase 
the  grantee’s  property,  when  as  a  matter  of  fact  such  a  pur¬ 
chase  would  be  beyond  the  legal  powers  of  the  city,  the  courts 
may  declare  this  reservation  void  even  though  before  the 
time  arrived  for  exercising  the  option,  the  city  should  obtain 
the  legal  right  to  purchase.  When  the  general  laws  of  the 
state  authorize  companies  of  a  certain  class  to  use  the  streets 
after  obtaining  the  consent  of  the  local  authorities,  the  courts 
may  hold  that  the  city  has  transcended  its  powers  in  imposing 
conditions  at  the  time  of  giving  consent.  In  cases  where  local 
grants  have  been  made  without  due  authority,  the  legislature 
may  ratify  the  grants  without  ratifying  the  conditions.  When 
the  terms  of  a  franchise  run  counter  to  the  judges’  ideas,  the 
grant  may  be  interpreted  to  mean  what  the  courts  think  it 
should  have  meant.  Eeservations  of  the  right  to  amend  or 
repeal,  may  be  nullified  by  the  interpretation  that  such  reser¬ 
vations  are  subject  to  limitations  in  the  fundamental  law  and 
that,  no  matter  what  was  agreed  to  in  the  granting  or  ac¬ 
ceptance  of  the  franchise,  the  right  to  repeal  cannot  be 
exercised  arbitrarily  when  such  action  would  result  in  the  de- 


22 


MUNICIPAL  FRANCHISES. 


struction  of  property  rights.  Franchises  once  exercised  are 
seldom  forfeited.  Fixtures  in  the  streets  are  nailed  fast  by 
the  need  for  the  service  and  the  claims  of  investors.  Fran¬ 
chise  restrictions,  when  they  have  passed  through  the  fire  of 
judicial  interpretation,  are  sometimes  much  less  formid¬ 
able  than  they  appeared  to  be  when  first  examined. 

32.  Consents  to  changes  of  motive  power. — In  connection 
with  street  railway  franchises  a  special  complication  has 
arisen  by  reason  of  the  several  different  kinds  of  motive  power 
used  at  different  periods  and  under  different  conditions  for 
propelling  cars.  Horse  power,  cables  and  electricity  have 
been  the  most  common,  though  dummy  steam  engines  and 
compressed  air  motors  have  not  been  unknown.  Electricity 
may  be  used  by  the  storage  battery,  the  overhead  trolley  or 
the  underground  conduit  system,  and  now  the  monorail  sys¬ 
tem  is  being  introduced.  Early  street  railway  franchises 
usually  specified  animal  power  or  granted  the  right  to  use  any 
power  other  than  steam.  When  the  changing  from  horse¬ 
power  to  cables,  or  from  horse-power  or  cables  to  electricity, 
was  at  its  height,  the  consents  of  railroad  commissioners,  city 
councils  and  property  owners  to  these  changes  in  motive 
power  were  almost  equivalent  to  a  general  re-granting  of 
franchises.  A  horse  railroad  in  a  street  is  quite  different 
from  an  electric  road  with  its  enormous  interurban  and  ex¬ 
press  cars.  Sometimes  new  conditions  were  imposed  on  com¬ 
panies  at  the  time  these  consents  were  given.  Such  franchise 
modifications  may  be  hidden  away  in  the  records  of  state  com¬ 
missions  or  the  archives  of  the  companies  and  never  be  known 
to  the  general  public.  Conditions  imposed  in  the  original 
franchises  may  be  modified  by  implication  in  these  consents. 
At  any  rate  the  amount  of  the  investment  upon  which  the 
companies  must  earn  a  “  reasonable  ”  return  before  rates 
can  be  reduced  by  legislation,  is  greatly  increased,  and  the 
price  the  city  will  have  to  pay  in  exercising  any  option  to 
purchase,  is  increased  in  a  similar  proportion. 

33.  Trackage  rights  in  lieu  of  franchises. — In  New 
York,  street  railway  companies  having  franchises  and  tracks 
in  certain  streets  may  give  trackage  rights  to  other  com¬ 
panies  which  have  no  franchises  in  those  particular  streets. 
Consequently,  a  property  owner  who  has  consented  to  the 
construction  of  a  street  railway  in  front  of  his  house  may  dis- 


HOW  FRANCHISE  RIGHTS  ARE  ACQUIRED. 


23 


cover  some  day  that  two,  or  three,  or  half  a  dozen  companies 
are  operating  cars  past  his  door,  instead  of  the  one  company 
to  which  a  franchise  was  given.  What  seems  like  a  material 
enlargement  of  franchise  rights  must  in  such  cases  be  traced, 
not  to  the  minutes  of  the  board  of  aldermen  or  the  board  of 
estimate  and  apportionment,  not  to  special  acts  of  the  legisla¬ 
ture,  not  to  the  consents  of  property  owners  filed  in  the  county 
clerk’s  office,  nor  in  the  records  of  the  supreme  court,  but  in 
the  private  vaults  of  the  companies,  where  their  operating 
agreements  are  kept.  In  such  cases  the  companies  enlarge 
their  own  franchise  rights.  This  certainly  does  not  diminish 
the  confusion  or  lessen  the  difficulty  of  intelligent  action  in 
granting  new  franchises  or  regulating  the  operation  of  those 
already  granted. 

34.  Constitutional  and  statutory  limitations.  — Every 
grant  made  by  the  legislature,  either  by  special  or  by  general 
act,  is  subject  to  the  limitations,  whatever  they  may  be,  im¬ 
posed  by  the  state  constitution.  The  fundamental  law  of  the 
state  may  forbid  exclusive  grants,  or  limit  the  period  for 
which  franchises  may  be  granted,  or  require  the  referendum 
or  the  consent  of  the  local  authorities.  In  like  manner  the 
general  laws  of  the  state  or  the  city’s  special  charter  may  im¬ 
pose  limitations  upon  the  action  of  the  city  council  in  grant¬ 
ing  franchises.  Some  general  restrictions  of  constitutional 
or  statute  law  exist  in  almost  every  state  of  the  Union.  If 
these  restrictions  are  not  clear  or  if  the  local  authorities  seek 
to  evade  them,  the  result  is  that  the  status  of  a  company’s 
franchise  rights  is  rendered  uncertain  and  unsatisfactory. 
However,  it  is  from  the  general  requirements  of  constitution, 
statute  or  charter,  that  a  little  order  is  brought  out  of  the 
chaos  of  special  privileges  granted  by  different  authorities 
at  different  times  and  in  different  places.  Another  force  tend¬ 
ing  toward  a  lessening  of  the  chaos  is  found  in  the  regulative 
control  exercised  by  state  commissions.  But  thus  far  these 
forces  tending  toward  uniformity  and  well-defined  franchise 
law  and  franchise  policies  have  had  comparatively  little  prac¬ 
tical  effect.  Bold  and  powerful  must  the  man  be  who  grapples 
with  the  problem  of  a  general  settlement  of  franchise  rights 
in  a  great  city. 

35.  Purpose  of  this  hook. — The  confusion  resulting  from 
the  changing  attitude  of  public  opinion  toward  public  util- 


24 


MUNICIPAL  FRANCHISES. 


ities,  from  the  variety  of  franchise  granting  authorities,  from 
the  lack  of  information  on  the  part  of  public  officials,  from 
the  absence  of  any  consistent  or  comprehensive  public  policy 
relative  to  franchises  in  any  particular  city,  and  from  the 
multiplicity  of  constitutional  and  statutory  restrictions  im¬ 
posed  by  forty-six  different  commonwealths,  has  left  fran¬ 
chise  matters  throughout  the  United  States  in  a  deplorable 
condition.  The  purpose  of  this  book  is  to  simplify,  as  far  as 
possible,  fundamental  conceptions  as  to  the  nature  and  pur¬ 
pose  of  franchise  grants ;  to  state  as  clearly  as  possible 
the  necessary  conditions  to  be  imposed  in  connection  with 
various  classes  of  franchises;  to  describe  the  best  types  of 
franchises  actually  in  force  in  different  cities  of  the  country; 
and,  finally,  to  discuss  in  a  general  way  the  principles  in¬ 
volved  in  the  regulation  of  public  service  utilities  by  means 
of  taxation,  rate  regulation,  public  service  commissions,  the 
Keferendum  and  municipal  ownership.  In  volume  one 
will  be  included  the  preliminary  discussion  of  fundamental 
principles  and  illustrative  chapters  on  electric  light,  telephone, 
telegraph,  signal,  electrical  conduit,  water,  sewer,  heating, 
refrigerating,  pneumatic  tube,  pipe-line  and  gas  franchises. 
For  volume  two  will  be  reserved  the  chapters  on  the  various 
classes  of  transportation  franchises  and  the  concluding  dis¬ 
cussion  of  taxation  and  control. 

While  not  hesitating  to  express  his  own  opinions  on  con¬ 
troversial  matters,  the  author  aims  primarily  to  present  an 
analysis  of  facts  and  conditions  in  such  form  as  to  be  avail¬ 
able  for  the  use  of  officials  having  responsibility  for  granting 
franchises  or  enforcing  franchise  contracts,  special  students 
of  public  affairs,  and  citizens  who,  individually  or  through 
semi-public  organizations,  are  endeavoring  to  bring  intel¬ 
ligence  to  bear  in  a  practical  way  upon  the  governmental 
problems  of  their  home  cities.  While  it  is  not  the  purpose  of 
the  author  to  cast  aspersions  upon  the  intelligence  or  sin¬ 
cerity  of  any  class  of  public  officials  or  of  politicians  in 
general,  it  is  clear  that  this  book  can  be  useful  only  to  those 
persons,  either  officials  or  private  citizens,  who  are  in  good 
faith  seeking  for  light  upon  this  most  complex  problem  and 
wffio  approach  the  subject,  not  from  the  standpoint  of  per¬ 
sonal  or  private  interests,  but  from  the  standpoint  of  the 
public  good. 


CHAPTER  II. 


WHAT  A  FRANCHISE  SIGNIFIES. 

86.  The  network  of  railway  tracks  built  39.  The  high  tension  wires  carrying  light 
into  the  streets.  and  power. 

37.  The  web  of  telephone  wires  connect-  40.  What  a  franchise  is. 

ing  the  buildings.  41.  Franchises  establish  monopolies. 

38.  The  system  of  water-pipes  under-  42.  What  gives  monopoly  its  advantage. 

ground. 

36.  The  network  of  railway  tracks  built  into  the  streets. 

— Some  years  ago,  while  investigating  the  street  car  service  in 
Grand  Rapids,  a  city  of  100,000  population,  the  writer  desired 
to  observe  the  “  headway  ”  or  schedule  of  operation  of  the 
various  street  car  lines  in  the  place.  With  this  purpose  in 
view,  he  took  up  his  position  near  Campau  Square,  through 
which  practically  all  the  car  lines  pass.  During  the  hours  he 
stood  there,  watching  the  drama  of  the  streets,  he  got  a  new 
idea  of  the  meaning  of  a  franchise.  Behold  these  heavy  cars 
ceaselessly  swinging  back  and  forth,  across  and  around  the 
city,  on  the  network  of  steel  ribbons  there  in  the  streets, 
driven  by  a  ruthless  force  invisible  save  in  occasional  flashes 
of  light  and  crackling,  twinkling  electric  sparks !  There  they 
go  right  through  the  open  street,  in  the  choicest  part  of  the 
thoroughfare,  back  and  forth,  back  and  forth,  all  day  long, 
carrying  half  a  city-full  of  people  every  twenty-four  hours, 
clanging  to  everyone  to  clear  the  way  and  crushing  those  who 
fall  across  their  path !  There  they  go,  harnessed  to  the  streets 
by  the  roadbed  and  the  iron  rails  beneath  and  the  live  wires 
overhead — and  by  the  habit  of  travel !  How  did  they  get 
there  ?  What  gives  them  this  right  of  way  as  against  all  other 
vehicles?  It  is  a  writing  approved  perhaps  fifteen  years  ago 
by  the  aldermen  who  were  then  enjoying  a  license  to  rule  the 
city  for  a  couple  of  years.  And  what  is  it  that  will  keep  these 
iron  tracks  in  the  streets  and  these  cars  running  past  the  ex¬ 
piration  of  the  period  fixed  in  the  written  franchise?  It  is 
the  necessities  of  the  public.  The  city  cannot  stop  traveling 

25 


26 


MUNICIPAL  FRANCHISES. 


just  because  a  day  is  set  in  that  old  document  promulgated 
by  aldermen  who  may  long  since  have  died  or  been  sent  to 
jail.  It  was  the  franchise  that  permitted  the  building  of  this 
wonderful  mechanism  into  the  frame-work  of  the  city,  but 
the  lapse  of  the  franchise  will  not  take  it  out  again. 

47.  The  web  of  telephone  wires  connecting  the  buildings. — 
And  how  about  these  singing  wires?  If  a  powerful  hand 
could  reach  down  from  the  upper  air  and  grasp  into  its  fingers 
all  the  wires  and  cables  entering  the  central  telephone  ex¬ 
change  and  lift  them  up,  how  the  city  would  awake !  If  the 
wires  were  strong  enough  to  hold  the  buildings  they  are  fas¬ 
tened  to,  the  city  itself  would  vanish  into  the  sky.  Every 
store,  every  factory,  every  public  building,  every  office  build¬ 
ing,  most  of  the  fine  residences  and  many  of  the  humble  ones, 
would  dangle  in  the  air  together.  We  seldom  think  that  thou¬ 
sands  of  stores  and  dwellings  in  every  large  city  are  literally 
tied  together  with  telephone  wires.  The  whole  city  is  caught 
in  a  network  of  sound-conductors  through  which  human 
voices  are  ceaselessly  speaking  to  human  ears.  The  telephone 
makes  the  people  of  a  great  city  close  neighbors  to  each  other. 
Night  and  day,  week-day  and  sabbath,  winter  and  summer, 
rain  and  shine,  urgent  business  and  pleasant  gossip  are  equally 
expedited  by  this  marvellous  uniter  of  the  modern  world. 
How  came  these  houses  to  be  tied  together?  How  is  it  that 
on  poles  or  in  conduits  these  copper  tendrils  are  carried 
through  every  street,  cutting  through  the  people’s  shade  trees 
or  breaking  through  the  cit}^s  pavements,  reaching  out  in  all 
directions  to  make  the  city  one  ?  This,  also,  is  the  fruit  of  a 
franchise,  a  written  word  of  some  council  or  legislature  grant¬ 
ing  to  some  particular  man  or  set  of  men  the  right  to  occupy 
the  streets  with  their  fixtures  to  perform  this  public  service. 
And  when  will  the  wires  come  down  or  the  conduits  be  ripped 
out  of  the  streets  ?  Surely  not  on  the  date  mentioned  in  some 
thirty-year-old  writing.  The  people  want  the  telephones  to 
stay.  They  do  not  wish  to  stop  talking  to  each  other  on  a 
day  certain,  set  down  in  the  almanac  a  generation  ago.  No, 
the  franchise  brought  the  wires  and  the  conduits,  but  the 
lapse  of  it  cannot  take  them  away  again. 

38.  Tho  system  of  water  pipes  underground. — If  a  man 
lays  his  hand  upon  a  hydrant,  he  touches  a  system  as  big  as 
the  city.  Underneath  the  streets  there  is  a  wilderness  of  iron 


WHAT  A  FRANCHISE  SIGNIFIES. 


27 


pipes  through  which  water  flows  with  shackled  force,  eager  to 
put  out  fires,  quench  thirst,  sprinkle  the  lawns,  wash  the 
clothes,  flush  the  sewers,  cleanse  the  streets,  cook  the  food 
or  bathe  the  body.  If  one  could  pull  the  system  of  water 
pipes  up  through  the  streets,  it  would  be  a  sight  to  see.  Down 
underground  there  the  city’s  life  currents  flow,  constantly 
pushed  outward  and  upward  by  the  weight  in  the  reservoirs 
and  the  standpipes  or  by  the  ceaseless  work  of  the  great  throb¬ 
bing  pumps.  Woe  to  the  city  if  its  heart  stops  beating ! 
Water!  Water,  indeed!  The  essence  of  life!  How  came 
these  pipes  here?  Whose  are  they?  If  not  the  city’s  pipes, 
a  franchise  must  have  opened  the  streets  for  them.  But 
whether  the  city’s  or  not,  they  must  stay.  The  lives  and 
property  of  the  people  compel  them  to  remain.  They  are 
indispensable  to  the  city.  If  they  are  operated  for  private 
gain,  look  well  to  the  terms  of  the  franchise. 

39.  The  high  tension  -wires  carrying  light  and  power. — 
The  city  is  ablaze  at  night.  How  strange  and  impenetrable 
is  the  darkness  of  the  country,  with  only  here  and  there  a 
flickering  ray  from  some  farm-house  window!  How  short 
the  winter’s  day !  How  long  and  dark  the  winter’s  night ! 
How  meager  the  opportunity  for  social  life  and  gaiety,  if 
one  must  be  at  home  when  night  falls.  What  makes  the  city 
light?  It  is  those  curious  little  pipes  running  under  the 
streets,  up  to  the  lamp-posts,  into  the  houses,  coming  from 
the  big  tall  cylinders  where  the  invisible,  expansive  gas  is 
stored  and  from  which  it  is  squeezed  under  the  whole  city 
and  into  every  building,  ready  to  burst  into  flame  and  give 
light  and  heat  or,  in  lieu  of  that,  to  spread  death  with  its 
poisonous  fumes.  The  turning  of  a  stop-cock  and  the  striking 
of  a  match  turn  the  night  into  day  in  any  city  home.  And, 
besides,  there  are  those  bundles  of  tubes  running  to  man¬ 
holes  at  the  street  corners.  Through  them  the  cables  un¬ 
rolled  from  a  reel  are  run  and  spliced  together  to  carry  in 
safety  underneath  the  ground  the  currents  of  lightning  that 
mount  the  towers  and  course  through  the  arc  lamps  and 
make  loops  in  the  incandescents,  until  the  whole  city,  from 
street  to  lofty  dome,  is  wreathed  in  the  glory  of  electric  light. 
Through  these  cables  also  run  the  currents  of  power  that 
drive  the  engines  of  industry.  Wonderful,  indeed !  Light, 
heat  and  power  distributed  throughout  a  city!  These,  too, 


28 


MUNICIPAL  FRANCHISES. 


come  by  means  of  franchises  and  stay  because  they  must. 
These  pipes  and  wires  and  conduits  may  be  removed  only 
when  the  city’s  time  has  come  and  it  needs  light  and  power 
no  more. 

40.  What  a  franchise  is. — A  special  privilege  granted  to 
one  man  or  one  group  of  men,  to  the  practical  exclusion  of 
others,  to  capitalize  these  common  needs  of  a  city-full  of 
people,  build  these  all-pervasive  systems  into  the  public 
thoroughfares  and  own  and  operate  them  for  private  profit — 
that  is  a  franchise.  No  wonder  that  Tom  L.  Johnson,  as 
mayor  of  a  great  city,  said :  “  The  best  franchise  is  a  dead 

one.” 1  And  no  wonder,  either,  that  the  Committee  on 
Public  Policy  of  the  National  Electric  Light  Association, 
representing  vested  privileges,  said :  “  All  franchises  should 

be  perpetual.” 2  As  we  have  seen,  a  franchise  reaches  out 
its  numberless  tentacles  and  fastens  onto  the  streets  of  the 
city  with  a  grip  that  never  relaxes.  It  enters  the  houses  both 
from  above  and  from  beneath  the  surface  of  the  earth  and 
lays  hold  of  their  most  vital  machinery.  In  all  the  large 
cities  of  the  United  States  most  homes  would  be  hardly 
habitable  if  all  public  utilities  that  are  operated  under  fran¬ 
chises  were  cut  off.  This  universal  dependence  upon  fran¬ 
chise  utilities  may  be  good  or  it  may  be  evil.  My  purpose 
here  is  not  to  show  that  it  is  the  one  or  the  other,  but  simply 
to  call  attention  to  the  nature  of  the  hold  franchises  have 
upon  the  common  life  in  every  city  and  to  emphasize  the 
potential  importance  of  every  franchise  grant,  no  matter 
how  insignificant  it  appears  when  it  is  being  voted  by  the  city 
council.  Surely  we  cannot  give  private  individuals  prac¬ 
tically  an  exclusive  license  to  furnish  us  water,  light,  com¬ 
munication  or  transportation,  without  taking  the  utmost 
pains  to  pull  the  sting  of  the  monopoly.  A  franchise,  carry¬ 
ing,  as  it  does,  the  power  of  intimate  control  over  certain 
fundamental  conditions  of  urban  life,  should  not  be  granted 
hastily  or  carelessly  or  ignorantly.  Above  all,  it  should  not 

1  In  a  public  speech  made  in  Detroit  in  the  street  railway  franchise  campaign 
of  1906,  when  Mayor  Johnson  went  over  from  Cleveland  to  help  fight  the  renewal 
franchise  offered  by  the  Detroit  United  Railway,  Mr.  Johnson  may  have  said, 
“  The  only  good  franchise  is  a  dead  one,”  instead  of  “  The  best  franchise  is  a  dead 
one,”  as  quoted  in  the  text.  The  writer,  who  was  present,  has  to  depend  on  his 
memory  for  this  quotation. 

2  Quoting  from  the  report  of  the  Sub-Committee  on  Taxation  and  Franchises, 
June  6,  1907,  as  follows  :  “The  public  is  interested  in  those  things,  which  we  will 
endeavor  to  state  in  the  order  of  their  importance :  (1)  complete  service  from  a 
geographical  standpoint ;  (2)  good  service,  and  (3)  low-priced  service. 

“  To  do  this  effectively  requires  that  all  franchises  shall  be  perpetual.” 


WHAT  A  FRANCHISE  SIGNIFIES. 


29 


be  made  the  subject  of  corrupt  or  private  bargaining.  Few 
men  are  so  depraved  that  they  would  commit  the  treason  of 
betraying  the  people’s  trust  in  franchise  negotiations  if  they 
clearly  understood  what  a  franchise  is.  And  few  constituen¬ 
cies  are  so  sodden  that  they  would  tolerate  such  a  betrayal  if 
they  were  conscious  of  its  full  significance. 

41.  Franchises  establish  monopolies. —  The  United  Kail- 
ways  and  Electric  Company  of  Baltimore  is  the  successor,  by 
consolidation,  purchase  and  stock  control,  of  seventy-five 
railroad  and  street  railway  companies.  The  Consolidated 
Gas  Company  of  New  York  controls,  or  has  succeeded  to  the 
rights  of,  about  seventy  gas  and  electric  companies,  while 
the  Brooklyn  Kapid  Transit  Company,  a  business  corpora¬ 
tion,  includes  in  its  historical  chart  the  names  of  seventy- 
five  companies.  The  complexity  of  the  corporate  history  of 
public  service  companies  operating  in  the  great  cities  is,  of 
course,  more  striking  than  that  of  the  companies  which  serve 
small  and  medium-sized  towns.  Nevertheless,  through  the 
expansion  of  telephone  and  interurban  railway  systems,  there 
are  many  cases  of  complex  consolidation  even  outside  of  the 
important  cities.  Although  it  is  unusual  for  a  city  to  grant 
a  franchise  that  is  in  terms  exclusive — and,  indeed,  in  many 
states  exclusive  franchise  grants  are  expressly  prohibited 
by  the  constitution — in  practice  the  natural  tendency  toward 
monopoly  everywhere  throttles  competition.  In  spite  of  the 
practically  uniform  experience  of  cities,  the  authorities  still 
cling  to  competition,  as  if  it  were  a  fetich,  for  the  regulation 
of  public  service  utilities.  Year  after  year  and  decade  after 
decade,  the  same  old  story  is  repeated,  of  franchises  granted 
to  new  street  railway  companies,  gas  companies,  electric  com¬ 
panies,  telephone  companies,  which  in  a  few  years,  by  the  in¬ 
evitable  logic  of  events,  either  absorb  their  predecessors  or  are 
absorbed  by  them. 

“  Public  utilities,  whether  in  public  or  in  private  hands, 
are  best  conducted  under  a  system  of  legalized  and  regulated 
monopoly,”  says  the  report  of  the  National  Civic  Federation 
Commission  on  Public  Ownership  and  Operation.1  The 
reasons  for  this  statement  are  not  far  to  seek.  The  available 
space  in  the  streets  for  the  use  of  permanent  fixtures  is  strictly 
limited.  Furthermore,  the  construction  and  maintenance  of 

1  “  Municipal  and  Private  Operation  of  Public  Utilities,”  Part  I,  volume  I,  p.  26 


30 


MUNICIPAL  FRANCHISES. 


any  particular  outfit  of  fixtures  entails  upon  the  public  great 
inconvenience  and  loss  through  the  tearing  up  of  the  streets, 
the  obstruction  of  traffic,  and  the  resulting  dangers  and  in¬ 
conveniences.  It  is  apparent,  therefore,  that  from  the  stand¬ 
point  of  the  public  interest,  every  permanent  fixture  placed 
in  the  street,  whether  overhead,  on  the  surface  or  under 
ground,  should  be  used  to  its  full  capacity  before  other  similar 
fixtures  are  constructed  except  such  as  may  be  built  at  con¬ 
venient  times  in  anticipation  of  future  needs.  From  the 
standpoint  of  the  companies  supplying  public  services,  the 
advantages  of  monopoly  are  obvious.  Street  railway  tracks, 
gas  and  water  pipes,  electrical  conduits,  poles  and  wires,  all 
require  the  investment  of  very  large  amounts  of  capital  in 
providing  the  facilities  for  the  distribution  of  the  commodity 
or  service.  If  one  of  these  distributing  systems  is  duplicated 
in  the  same  streets  or  in  the  same  territory,  there  is  involved 
a  duplication  of  investment  which,  with  competitive  rates, 
is  ruinous  to  the  enterprise.  After  capital  has  once  been  in¬ 
vested  in  unnecessary  fixtures,  the  pressure  of  competing 
rates  leads  the  owners  of  the  different  fixtures  to  combine  in 
order  to  maintain  prices  and  avoid  insolvency.  Such  com¬ 
bination  is  rendered  comparatively  easy  by  the  fact  that  the 
number  of  possible  competitors  is  very  closely  circumscribed 
by  the  physical  limitations  of  the  streets.  A  consolidation 
having  once  been  effected,  the  public  suffers  a  further  incon¬ 
venience  as  a  result  of  the  abortive  effort  at  competition. 
Having  combined  their  interests,  the  companies  naturally 
crowd  up  rates  or  skimp  the  service  in  order  to  be  able  to 
pay  interest  and  dividends  upon  the  large  amount  of  capital 
wastefully  invested.  From  the  standpoint  of  the  companies, 
there  is  still  another  reason  for  consolidation.  In  most  of  the 
public  utilities,  aside  from  the  matter  of  the  duplication  of 
fixtures  in  the  streets,  there  are  great  economies  in  unified 
operation.  These  savings  appear  in  the  manufacture  of  gas 
and  electricity,  in  the  development  of  water  supply,  and  in 
the  practical  operation  of  street  railway  lines.  It  is  gen¬ 
erally  much  cheaper  to  manufacture  electrical  energy  at  a 
great  central  station  than  at  a  number  of  small  plants 
operated  independently  of  each  other.  The  street  railway 
system  of  a  great  city  can  be  operated  at  less  cost  if  the  same 
management  controls  all  the  lines  and  is  thereby  enabled  to 


WHAT  A  FRANCHISE  SIGNIFIES. 


31 


establish  through  routes,  transfer  cars  at  convenient  points 
and  adopt  means  to  lessen  congestion  of  traffic.  From  the 
standpoint  of  the  public,  there  is  also  an  advantage  in  unified 
administration,  especially  in  the  case  of  street  railways  and 
telephones,  because  unity  of  operation  means  greatly  im¬ 
proved  service.  As  a  result,  therefore,  of  the  natural  ad¬ 
vantages,  both  to  the  public  and  to  the  companies,  resulting 
from  consolidation,  there  is  a  universal  and  practically  ir¬ 
resistible  tendency  toward  monopoly.  The  conclusion  reached 
by  the  Civic  Federation  Committee  is  in  line  with  reason 
and  experience.  In  each  center  of  population  every  public 
utility  should  be  controlled  and  operated  as  a  monopoly. 

The  only  difficulty  with  this  conclusion  is  found  in  the  fact 
that  a  private  monopoly,  unless  under  strict  public  control, 
is  odious.  The  power  to  charge  all  the  traffic  will  bear  and 
to  neglect  improvements  in  service,  without  fear  of  losing 
control  of  a  business,  is  the  one  temptation  that  has  always 
proved  irresistible  to  those  in  possession  of  monopolies.  It 
is  the  experience  or  the  fear  of  such  oppression  as  the  out¬ 
growth  of  private  monopoly,  that  keeps  alive  the  dream  of 
competition  in  franchise  grants. 

42.  What  gives  monopoly  its  advantage — In  the  pre¬ 
ceding  section  we  have  seen  that  monopoly  in  the  control  of 
public  utilities  is  almost  inevitable;  and,  indeed,  both  from 
the  standpoint  of  the  public  and  from  the  standpoint  of  the 
business  itself,  is  for  many  reasons  highly  desirable.  The 
difference  between  public  utilities  and  other  lines  of  busi¬ 
ness,  so  far  as  the  question  of  monopoly  is  concerned,  is  in 
the  fact  that  in  the  case  of  public  utilities  the  interests  of  the 
public  unite  with  private  interests  in  support  of  the  monopoly 
principle.  It  is  evident,  however,  that  no  monopoly  of  a 
necessary  and  universal  service  can  be  safely  intrusted  to 
private  operation  unless  it  is  kept  under  strict  public  control. 
The  sting  of  private  monopoly  lies  in  the  fact  that  without 
competition  to  keep  rates  down  to  a  basis  of  cost,  including 
reasonable  profits,  the  natural  tendency  of  those  in  control 
of  the  business  is  to  establish  rates  at  the  point  where  they 
will  yield  the  maximum  of  profit,  taking  into  consideration 
the  amount  of  the  business.  It  is  here  that  the  interests  of 
the  private  owner  and  the  interests  of  the  public  clash.  In 
the  case  of  water  and  gas,  electric  light  and  telephones,  trans- 


32 


MUNICIPAL  FRANCHISES. 


portation  and  practically  all  other  public  utilities,  the  gen¬ 
eral  interest  of  the  community  demands  that  the  use  of  the 
utility  should  be  as  wide-spread  as  possible.  The  reason  for 
this  is  that  public  utilities  furnish  the  natural  compensations 
for  the  disadvantages  of  urban  life.  Th2y  enable  a  con¬ 
gested  community  to  live  and  do  business  with  a  much  greater 
degree  of  health  and  comfort  than  would  be  possible  without 
them.  Public  policy  requires,  not  only  that  utilities  should 
be  made  as  cheap  as  possible  to  the  people  living  within  the 
congested  districts,  but  also  that  the  area  in  which  these 
utilities  are  available  should  be  as  widely  extended  as  pos¬ 
sible.  Low  rates  and  the  extension  of  the  service  into  sparsely 
settled  suburban  districts,  both  run  counter  to  the  monopoly 
interest  of  the  private  holder.  Primarily,  then,  the  attention 
of  the  city  or  the  state,  in  the  granting  of  a  franchise  or  in 
the  regulation  of  a  public  utility  operated  by  private  parties, 
should  be  directed  to  the  problem  of  providing  an  adequate 
substitute  for  competition  in  bringing  about  extensions  of  the 
service  and  in  keeping  down  its  cost  to  the  consumer. 

Any  public  utility  operated  substantially  as  a  monopoly 
under  a  franchise  from  the  public  authorities,  gives  its  holder 
a  special  economic  advantage  over  all  other  persons  not 
similarly  favored.  But  the  furnishing  of  a  service  that  is  a 
universal  necessity,  or  at  least  a  common  convenience  in  a 
city,  when  no  other  person  is  in  a  position  to  furnish  a 
similar  service,  gives  the  franchise  holder  two  special  advan¬ 
tages.  In  the  first  place,  he  is  assured  of  a  steady  and  regu¬ 
larly  increasing  income,  which  generally  takes  the  form  of 
cash  at  the  time  the  service  is  performed  or  very  shortly 
after  the  commodity  is  supplied.  In  the  second  place,  it  en¬ 
ables  him  to  fix  a  price  for  the  service  or  commodity  far 
above  the  actual  cost  and  to  maintain  the  price  at  a  high 
point  long  after  the  cost  of  manufacturing  the  commodity  or 
rendering  the  service  has  been  reduced  either  by  the  increase 
in  the  demand  or  by  improvements  in  the  art.  Where  the 
franchise  holder  enjoys  a  special  advantage,  other  people, 
including  both  would-be  competitors  and  the  general  mass 
of  consumers,  are  at  a  disadvantage.  It  is  evident,  therefore, 
that  the  first  requisite  of  a  good  franchise,  or  ©f  a  good  regu¬ 
lation  under  a  franchise,  is  to  pull  the  sting  of  the  monopoly. 
Although  there  are  several  ways  in  which  the  holder  of  a 


WHAT  A  FRANCHISE  SIGNIFIES. 


33 


monopoly  franchise  may  secure  unusual  profits  or  inflict  un¬ 
usual  injuries  upon  the  public,  the  first  and  most  important 
source  of  his  economic  advantage  is  the  unlimited  profit 
which  he  may  derive  in  the  direct  course  of  the  business. 


CHAPTER  III. 

MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM. 

43.  The  short  term  franchise.  55.  The  sliding  scale  device. 

44.  The  indeterminate  franchise.  56.  Division  of  profits  with  the  city. 

45.  The  sale  of  franchises.  57.  The  right  to  purchase  reserved  to  the 

46.  Fixing  rates  in  the  franchise  grant.  city. 

47.  The  regulation  of  rates.  58.  Reversion  of  the  property  to  the  city 

48.  The  imposition  of  special  taxes.  at  the  expiration  of  the  franchise. 

49.  Special  obligations  imposed  in  fran-  59.  Profits  induced  by  creating  special 

chise  grants.  demands  for  service. 

50.  Improved  service  required.  60.  Profits  from  auxiliary  enterprises. 

51.  Extensions  into  unprofitable  terri-  61.  Profits  from  the  sale  of  accessories. 

tory.  62.  Profits  from  the  sale  of  by-products. 

52.  A  uniform  rate  without  a  minimum  63.  Profits  from  the  sale  of  incidental 

charge.  privileges  and  surplus  services. 

53.  Better  treatment  of  employees  re-  64.  Profits  from  the  exploitation  of  real 

quired.  estate. 

54.  Controll  ing  the  company’s  contracts. 

43.  The  short  term  franchise. — The  source  of  greatest 
profit  in  a  public  utility  monopoly  is  the  increase  in  the 
demand  for  the  service.  Indeed,  many  public  utilities  oper¬ 
ated  under  exclusive  grants  are  not  at  all  profitable  during 
their  first  years.  A  public  utility  requires  a  heavy  invest¬ 
ment,  and  adequate  returns  can  be  secured  only  after  the  de¬ 
mand  for  the  service  has  been  developed  and  the  territory  in 
which  the  service  is  rendered  has  become  fully  populated. 
In  the  early  days  of  franchise  granting  hardly  anyone  realized 
that  a  franchise  might  become  extremely  valuable.  In  1837 
the  population  of  Chicago  was  4,170.  Seventy  years  later 
the  population  of  this  city  had  increased  to  2,000,000.  It  is 
evident  that  a  street  railwa}q  gas  or  water  franchise,  the 
operation  of  which  would  be  utterly  unprofitable  in  a  city  of 
4,000  people,  might  become  of  immense  value  long  before  the 
city  had  grown  to  the  present  size  of  Chicago.  One  of  the 
most  effective  ways,  therefore,  of  limiting  the  profits  of  a 
franchise  monopoly,  is  to  limit  the  term  for  which  the  fran¬ 
chise  is  granted.  While  many  franchises,  especially  in  the 
eastern  states,  were  originally  granted  without  time  limit 
and  are  therefore  considered  to  be  perpetual,  in  recent  years 
there  has  been  a  strong  tendency  to  limit  franchises  to  periods 

34 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  35 

of  from  twenty  to  fifty  years.  Even  in  New  Jersey,  where, 

until  very  recently,  great  corporations  have  held  practically 

undisputed  sway,  a  commission  appointed  by  the  Governor  in 

1905  to  investigate  the  subject  of  franchises,  recommended, 

among  other  things,  that  “  all  privileges  hereafter  given 

should  be  limited  and  not  exceed  thirty-three  years  unless  a 

majority  vote  of  the  legal  voters  should  authorize  longer 

grants  not  to  exceed  sixty-six  years.”  1  The  time  limit  for 

franchises  recommended  by  the  National  Municipal  League  in 

its  “  Municipal  Program,”  published  ten  years  ago,  was 

twenty-one  years.  At  about  the  same  time,  when  the  charter 

of  Greater  New  York  was  framed,  a  provision  was  inserted 

to  the  effect  that  original  grants  should  not  be  made  for  a 

longer  period  than  twenty-five  years ;  but  the  right  to  renewal 

for  a  further  period  of  twenty-five  years  at  a  revaluation 

might  be  included  in  the  grant.  When  the  legislatures  of 

Ohio  and  Illinois  in  the  last  decade  of  the  nineteenth  centurv 

•/ 

passed  street  railway  laws  authorizing  the  local  authorities  to 
grant  franchises  for  periods  of  fifty  years,  there  was  a  tre¬ 
mendous  outcry  and  public  sentiment  compelled  the  repeal 
of  this  legislation.  In  Illinois  the  maximum  period  for 
which  a  franchise  may  be  granted  was  fixed  at  twenty  years. 
In  Ohio,  after  Cincinnati  had  granted  a  fifty-year  franchise, 
the  maximum  period  was  limited  to  twenty-five  years.  In  the 
new  constitution  of  Michigan  the  limit  is  fixed  at  thirty  years. 

It  is  apparent  that  if  monopoly  profits  are  to  be  curtailed 
by  the  limitation  of  the  period  for  which  the  franchise  is 
granted,  this  period  should  be  shortest  in  the  case  of  well- 
developed  utilities  and  in  large  cities  where  population  is 
dense  and  business  is  profitable.  There  are  some  disadvan¬ 
tages,  however,  in  the  short-term  franchise  as  a  means  of 
curtailing  profits.  Unless  provision  is  made  for  taking  the 
plant  and  fixtures  off  the  hands  of  the  franchise  holder  at  the 
expiration  of  the  grant,  it  will  be  necessary  for  him,  in  the 
conduct  of  his  business,  to  charge  prices  that  will  enable  him 
to  get  back  his  capital  out  of  the  earnings.  This  is  true  for 
the  reason  that  public  utility  fixtures  might  as  well  go  to  the 
scrap-heap  if  they  have  to  be  removed  from  the  streets.  In- 

1  See  Report  of  the  “Commissioners  to  Investigate  the  whole  Subject  of  Fran¬ 
chises  granted  by  Municipalities  to  Public  Utility  Corporations,”  published  by 
the  State  of  New  Jersey,  1906. 


36 


MUNICIPAL  FRANCHISES. 


deed,  in  many  cases  the  “  remains  ”  would  not  be  worth  the 
cost  of  removing  them  and  restoring  the  streets  to  their 
original  condition.  Another  disadvantage  of  short-term 
franchises  without  provision  for  purchase  of  the  plant  and 
fixtures,  is  that  the  franchise  holder  will  necessarily  confine 
his  operations  to  the  most  congested  districts,  leaving  the 
sparsely  settled  portions  of  the  city  undeveloped.  It  is 
therefore  desirable,  from  the  standpoint  of  public  policy, 
that  in  case  franchises  are  to  be  granted  for  short  terms, 
provision  should  be  made  for  the  purchase,  at  the  expiration 
of  the  franchise  period,  of  the  property  at  its  actual  value, 
either  by  the  city  or  by  another  company  to  which  a  franchise 
may  be  granted. 

44.  The  indeterminate  franchise _ Recognizing  that  a 

public  utility  is  a  permanent  enterprise  bound  to  develop 
and  expand  with  the  growth  of  the  community,  some  au¬ 
thorities  are  opposed  on  principle  to  the  granting  of  fran¬ 
chises  for  definitely  limited  periods.  It  is  said  that  no  city 
can  foresee,  even  for  the  comparatively  short  period  of  twenty 
years,  the  vicissitudes  of  any  particular  utility.  In  the  case 
of  street  railways  changing  conditions  may  require  the  re¬ 
moval  of  the  tracks  from  certain  streets,  a  change  in  motive 
power,  the  relaying  of  the  rails  and  roadbed,  and  other  radical 
alterations  involving  large  additions  to  permanent  invest¬ 
ments.  In  other  utilities  corresponding  changes  may  be 
requifed.  It  is  urged  that  for  the  proper  development  of  the 
utility  and  for  the  continuous  control  of  the  streets  by  the 
public  authorities  an  indeterminate  or  revocable  franchise 
is  required.  Massachusetts  is  the  home  of  the  indeterminate 
franchise.  In  that  state  street  railway  “  locations  ”  may  be 
revoked  by  the  local  authorities  at  any  time  after  the  expira¬ 
tion  of  one  year  from  the  date  of  a  franchise;  but  the  revoca¬ 
tion,  unless  accepted  by  the  franchise  holder,  is  subject  to 
approval  by  the  State  Board  of  Railroad  Commissioners.  In 
legislating  for  the  District  of  Columbia,  Porto  Rico  and  the 
Philippine  Islands,  the  United  States  Congress  has  followed 
the  example  of  Massachusetts  and  has  established  the  indeter¬ 
minate  franchise.  The  new  street  railway  ordinances  of 
Chicago  also  reserve  to  the  city  the  right  to  terminate  them 
at  any  time  by  the  purchase  of  the  property.  Wisconsin,  in 
its  public  utilities  law  passed  in  1907,  adopted  the  principle 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  37 

of  the  indeterminate  franchise  for  all  future  grants,  and  also 
authorized  companies  operating  under  limited-term  fran¬ 
chises  to  surrender  them  and  accept  indeterminate  permits. 
The  new  constitution  of  Michigan  recognizes  the  indeter¬ 
minate  franchise  by  providing  that  any  franchise  not  revoc¬ 
able  at  will  shall  require  the  affirmative  vote  of  sixty  per 
cent  of  the  electors  of  a  city  before  it  becomes  binding. 
There  are  numerous  instances  in  various  parts  of  the  country 
where  franchises  granted  by  special  acts  of  the  legislature 
or  by  ordinance  have  reserved  to  the  legislative  body  the  right 
to  amend,  alter  or  repeal  them.  This  reservation  has  not, 
however,  been  of  much  practical  use.  The  specific  way  in 
which  the  indeterminate  franchise  tends  to  limit  profits,  is 
by  putting  the  franchise  holder  on  his  good  behavior  and  en¬ 
couraging  him  to  grant  reasonable  rates  and  give  excellent 
service  in  order  to  keep  on  good  terms  with  the  public  and 
avoid  losing  his  franchise  altogether.  It  is  apparent,  how¬ 
ever,  that  the  indeterminate  franchise  might  under  some 
conditions  result  in  over-conservatism  in  the  investment  of 
capital.  In  other  cases,  if  the  public  authorities  should  be¬ 
come  capricious,  the  indeterminate  franchise  might  bring 
about  unmerited  loss  to  investors.  In  order  that  sufficient 
capital  to  meet  all  reasonable  requirements  of  liberal  exten¬ 
sions  and  improved  service  may  be  had,  and  that  rates  may 
be  kept  close  to  the  line  of  necessary  cost  of  service,  there 
should  be  attached  to  the  indeterminate  franchise  a  provision 
that  in  case  the  grant  is  revoked,  except  possibly  for  special 
locations  where  changing  conditions  require  the  removal  of 
fixtures,  the  city  should  pay  to  the  franchise  holder  the  full 
value  of  his  operating  plant.1 

1  On  the  general  subject  of  indeterminate  franchises,  see  report  of  the  Massa¬ 
chusetts  Special  Committee  on  the  “  Relations  between  Cities  and  Towns  and 
Street  Railways,”  Charles  Francis  Adams,  chairman,  published  in  1898;  ‘‘The 
Question  of  Franchises,”  by  Geo.  C.  Sikes,  published  in  the  Atlantic  Monthly  for 
March,  1903,  and  afterward  reprinted  as  a  separate  pamphlet ;  and  the  “  Report 
on  the  Indeterminate  Franchise  for  Public  Utilities  ”  submitted  by  Commissioner 
Milo  R.  Maltbie  to  the  Public  Service  Commission  for  the  First  District,  New  York, 
Dec.  29,  1908.  It  is  fair  to  say  that  there  is  considerable  sentiment  in  Massachu¬ 
setts  in  favor  of  replacing  the  indeterminate  franchise  by  definite  term  grants. 
This  sentiment  has  been  voiced  in  the  legislature  by  Dr.  Julius  Garst,  of  Worces¬ 
ter,  whose  bill  to  effect  the  change  was  defeated  in  the  lower  house  in  1904  by  the 
rather  close  vote  of  76  to  112.  The  opposition  to  the  Massachusetts  indeterminate 
franchise  is  based  upon  the  fact  that  grants  in  that  state  have  proved  to  be  prac¬ 
tically  perpetual.  “  I  consider  the  indeterminate  franchise  law  of  this  state  im¬ 
practicable  and  delusive,”  writes  Dr.  Garst  under  date  of  Jan.  14,  1909.  ‘‘To 
revoke  a  franchise  suddenly  without  giving  twenty  or  more  years  for  the  stock¬ 
holders  to  recover  on  their  investments  is  a  proposition  that  I  would  not  approve 
and  I  think  that  no  legislature  would  do  so,  and  if  it  were  to  do  so  it  is  probable 
that  the  supreme  court  would  rule  that  the  market  price  must  be  paid  for  the 
capital  stock.” 


38 


MUNICIPAL  FRANCHISES. 


45.  The  sale  of  franchises. — One  of  the  most  obvious  ways 
of  preventing  franchise  holders  from  enjoying  the  fruits  of 
monopoly,  is  to  sell  the  franchise  to  the  highest  bidder. 
Under  the  laws  of  California,  when  a  franchise  is  to  be 
granted,  after  its  terms  have  been  fixed  by  the  local  author¬ 
ities,  it  is  advertised  for  a  certain  period  and  sold  to  the  com¬ 
pany  offering  most  for  it.  The  plan  of  selling  street  railway 
franchises  at  auction  was  in  use  at  one  time  in  New  York 
City.  When  franchises  are  sold,  payment  is  taken,  sometimes 
in  a  lump  sum,  sometimes  in  a  fixed  annual  payment  and 
sometimes  in  a  percentage  of  gross  receipts.  Occasionally  a 
franchise  is  offered  to  the  company  that  will  give  the  lowest 
rates  and  the  best  service.  It  is  obvious  that  the  policy  of 
selling  a  franchise  for  a  lump  sum  payable  when  the  grant 
is  made,  is  not  consistent  with  good  municipal  policy.  The 
franchise  is  a  continuous  burden  upon  the  street,  and  any 
payment  which  the  city  receives  for  it  should  at  least  be 
distributed  over  the  entire  period  of  the  life  of  the  franchise 
in  order  to  offset  this  burden.  To  sell  rights  in  the  streets 
for  twenty  or  fifty  years  or  for  an  unlimited  period  and  apply 
the  total  price  of  these  rights  to  the  reduction  of  taxation  or 
the  payment  of  current  expenses  in  the  year  when  they  are 
sold,  is  substantially  equivalent  to  the  issuing  of  bonds  for 
maintenance  purposes  or  to  the  sale  of  real  estate  and  other 
permanent  investments  for  the  same  purposes.  A  further  ob¬ 
jection  to  the  sale  of  franchises  for  a  lump  sum,  is  that  the 
city  is  almost  certain  not  to  get  the  full  value  of  the  fran¬ 
chise.  No  one  can  accurately  foresee  how  much  a  franchise 
will  be  worth  during  the  course  of  a  generation.  Its  future 
value  will  depend  upon  the  growth  of  the  city,  the  develop¬ 
ment  of  the  particular  utility  for  which  the  franchise  is  to 
be  used,  and  numerous  other  conditions.  If  the  successful 
bidder  for  a  franchise  is  asked  to  determine  and  pay  to  the 
city  in  advance  the  amount  that  he  is  willing  to  give  for 
the  franchise,  he  must,  as  a  matter  of  necessity,  figure  a  very 
liberal  discount  on  the  future  value  of  the  grant.  He  must 
protect  himself  against  risks  of  loss,  and  of  course  he  must 
deduct  from  the  future  value  of  the  franchise  at  least  the 
interest  on  his  money  from  the  date  of  payment  until  the 
full  value  of  the  franchise  is  realized  in  use.  Furthermore, 
the  difficulty  which  the  franchise  holder  will  have  in  securing 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  39 

capital  to  invest  at  the  beginning  of  his  enterprise  in  the  pur¬ 
chase  of  intangible  rights  years  in  advance  of  the  time  when 
the  practical  value  of  these  rights  will  be  fully  developed, 
will  also  tend  to  reduce  very  greatly  the  amount  of  his  bid. 
If  the  payment  for  a  franchise  takes  the  form  of  a  definite 
sum  payable  year  after  year  throughout  the  life  of  the  grant, 
some  of  the  difficulties  mentioned  are  obviated.  There 
remains,  however,  this  difficulty,  that  the  bidder  cannot  fore¬ 
see  with  even  approximate  certainty  what  the  value  of  the 
franchise  will  come  to  be  before  its  expiration;  and  accord¬ 
ingly,  to  be  on  the  safe  side,  he  must  bid  low.  A  much  more 
satisfactory  method  of  giving  compensation  for  franchise 
rights,  is  the  payment  of  a  percentage  of  gross  receipts  from 
the  business  transacted  under  the  franchise.  This  percentage 
may  remain  the  same  year  after  year  throughout  the  period 
of  the  grant,  or  it  may  be  arranged  so  as  to  increase  at 
periodic  intervals.  If  the  percentage  of  gross  receipts  is  the 
same  year  after  year,  approximate  justice  will  be  attained 
inasmuch  as  the  compensation  for  the  franchise  right  will  in¬ 
crease  in  the  same  proportion  as  the  gross  receipts  from  the 
business.  If,  however,  the  business  is  likely  to  be  unprofit¬ 
able  for  the  first  few  years  and  very  profitable  thereafter,  a 
much  better  arrangement  will  be  to  require  the  payment  of  a 
small  percentage  during  the  first  few  years  and  a  larger  one 
later.  The  New  York  law  now  requires  street  railways  to 
pay  a  minimum  of  three  per  cent  of  their  gross  receipts  for 
the  first  five  years  and  five  per  cent  thereafter. 

It  is  sometimes  contended  that  compensation  for  franchise 
rights  ought  in  justice  to  be  measured  according  to  the 
amount  of  net  receipts  or  profits  rather  than  according  to  the 
amount  of  gross  receipts.  A  practical  objection,  however,  to 
this  plan  is  that  it  is  extremely  difficult  for  the  public  au¬ 
thorities  to  ascertain  exactly  what  net  receipts  are,  and  it  is 
extremely  easy  for  an  operating  company  to  juggle  its  ac¬ 
counts  or  manipulate  its  expenses  so  as  to  keep  the  apparent 
net  receipts  at  a  low  figure.  The  division  of  net  profits  with 
the  city  is  not  a  workable  scheme  unless  the  city  has  very  far- 
reaching  control  over  the  company’s  accounts  and  expendi¬ 
tures. 

A  serious  difficulty  in  the  way  of  the  entire  plan  of  selling 
franchises  to  the  highest  bidder  is  encountered  in  the  case  of 


40 


MUNICIPAL  FRANCHISES. 


extensions.  If  the  proposed  extension  of  a  railway  line,  for 
example,  is  of  such  a  nature  that  it  must  be  operated  in  con¬ 
nection  with  an  existing  railway,  there  will  be  no  competition 
and  consequently  the  city  is  not  likely  to  receive  a  reasonable 
compensation.  If,  on  the  other  hand,  there  are  competing 
railway  systems,  in  connection  with  which  the  extension 
might  be  used,  there  is  likely  to  be  excessive  competition. 
One  company,  in  order  to  keep  its  rival  out  of  a  particular 
street  or  to  hold  for  itself  a  strategic  point  in  the  future 
development  of  the  business,  is  likely  to  offer  so  much  for 
the  franchise  that  it  will  be  unable  to  pay  the  price.  It  has 
sometimes  happened  in  New  York  City  that  rival  companies, 
bidding  for  an  extension,  have  offered  to  pay  to  the  city  from 
thirty-five  per  cent  to  one  hundred  per  cent  of  the  gross 
receipts.  Indeed,  some  years  ago  an  important  new  fran¬ 
chise  for  many  streets  in  what  is  now  the  Borough  of  The 
Bronx,  was  sold  at  public  auction,  and  the  highest  bidder  1 
guaranteed  to  pay  to  the  city  for  the  first  five  years  97  per 
cent  of  the  gross  receipts  in  addition  to  the  statutory  mini¬ 
mum  of  3  per  cent,  and  for  the  remainder  of  the  period  after 
the  expiration  of  the  five  years,  95  per  cent  in  addition  to 
the  statutory  minimum  of  5  per  cent.  Of  course  it  is  clear 
that  franchises  granted  on  such  conditions  will  never  be  used. 

Our  discussion  has  already  led  us  to  the  conclusion  that 
in  any  community  each  public  utility  should  be  operated  as 
a  monopoly.  If  this  condition  prevails,  it  is  apparent  that 
the  plan  of  limiting  profits  by  the  sale  of  the  franchise  will 
be  entirely  ineffectual,  except  in  the  case  of  the  original  es¬ 
tablishment  of  the  utility  or  the  renewal  of  the  franchise  for 
the  entire  city.  In  the  case  of  extensions  the  city  would 
receive  no  compensation  unless  for  certain  important  lines 
very  much  desired  by  the  company  for  the  purpose  of  strength¬ 
ening  its  position  or  developing  an  unusually  profitable  field. 
In  the  great  majority  of  cases,  where  the  demand  for  exten¬ 
sions  comes  first  from  the  public,  the  city  would  get  no  com¬ 
pensation  at  all  and,  indeed,  might  be  required  to  compromise 
on  payments  due  under  the  main  grant  in  order  to  induce 
the  company  to  undertake  the  desired  extensions.  For  these 
reasons  the  plan  of  limiting  profits  by  the  sale  of  the  fran¬ 
chise  is  generally  unsatisfactory. 

JThe  People’s  Traction  Company. 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  44 

46.  Fixing  rates  in  the  franchise  grant. — Even  more  im¬ 
portant  in  some  cases  than  limiting  the  period  of  a  franchise 
or  making  it  revocable,  is  the  fixing  of  a  maximum  rate  above 
which  the  charges  for  the  service  may  not  go  while  the  fran¬ 
chise  is  in  use.  It  has  been  customary  in  practically  all 
street  railway  franchises  to  fix  the  maximum  fare  at  five 
cents  for  each  ride.  This  maximum  has  been  varied  in  a 
number  of  cases  either  by  requiring  a  more  or  less  complete 
system  of  free  transfers  or  by  requiring  the  sale  of  tickets  at 
a  lower  rate  than  five  cents,  or  by  fixing  special  rates  at  cer¬ 
tain  hours  or  for  certain  classes  of  patrons.  In  recent  years 
there  has  also  been  a  strong  tendency  to  fix  a  maximum  price 
for  gas,  electricity  and  telephone  service  in  franchise  grants. 
Much  more  generally,  however,  than  in  the  case  of  street 
railways,  these  utilities  have  been  subject  to  rate  regulation- 
by  state  legislation  or  local  ordinance.  Unquestionably,  the 
fixing  of  a  maximum  rate  may  limit  profits  very  consider¬ 
ably.  This  is  especially  true  in  connection  with  a  public  util¬ 
ity  such  as  water,  which  is  an  absolute  necessity  to  every  one. 
While  it  is  true  that  in  many  cities  the  use  of  wells  and  the 
sale  of  water  in  bottles  curtail  to  a  limited  extent  the  monop¬ 
oly  of  the  water  works,  in  other  cities  there  is  not  left  even 
this  slight  leeway  for  competition.  With  the  growth  of  popu¬ 
lation  and  the  enlargement  of  city  areas,  street  railway  trans¬ 
portation,  telephones,  gas  and  electric  light,  become  almost 
as  necessary  as  water.  Wherever  under  the  prevailing  con¬ 
ditions  a  particular  utility  is  a  necessity,  the  company  having 
a  monopoly  of  the  supply  would  undoubtedly  find  it  profit¬ 
able  to  fix  a  high  price  if  it  were  permitted  to  do  so.  It  is 
in  these  cases  that  a  maximum  limit  established  in  the  fran¬ 
chise  grant  is  of  most  use.  It  cannot  be  said,  however,  that 
a  specific  limit  can  be  fixed  in  advance  for  a  long  period  of 
years,  which  does  not  give  great  possible  advantages  to  the 
franchise  holder  or  else  subject  him  to  the  probability  of  heavy 
loss.  If  the  cost  of  service  is  greatly  reduced,  then  the  fixed 
maximum  operates  to  his  enormous  advantage.  If,  on  the 
other  hand,  the  value  of  money  decreases  or  the  necessary 
expenses  of  the  service  are  largely  increased,  he  suffers  disad¬ 
vantage  which  may  mean  financial  ruin.  When  these  possi¬ 
bilities  are  taken  into  consideration,  the  almost  inevitable 
outcome  is  that  the  maximum  rate  fixed  in  the  franchise  and 


42 


MUNICIPAL  FRANCHISES. 


accepted  by  the  grantee  is  a  rate  that  will  certainly  be  high 
enough  and  may  be  exorbitant.  In  public  utilities  where 
lower  rates  have  a  marked  effect  upon  stimulating  consump¬ 
tion,  the  franchise  holder  may  find  it  to  his  advantage 
voluntarily  to  reduce  the  rates  below  the  maximum  fixed  in 
the  grant.  It  is  clear  that  while  the  establishment  of  a 
maximum  rate  in  the  franchise  itself  may  be  a  valuable  safe¬ 
guard  in  protecting  the  public  from  extortion,  it  is  not  in 
itself  a  sufficient  guaranty  that  rates  will  be  reasonable  under 
conditions  as  they  develop  from  time  to  time.  Accordingly, 
provision  should  be  made  for  periodic  readjustments  of  rates, 
or  the  power  of  rate  supervision  should  be  reserved.  There 
is,  to  be  sure,  an  advantage  in  establishing  in  the  franchise 
itself  as  low  maximum  rates  as  possible,  provided  that  such 
rates  will  surely  permit,  during  the  entire  period  of  the  fran¬ 
chise  grant,  the  adequate  and  satisfactory  service  which,  after 
all,  is  the  first  requisite  in  the  management  of  a  public 
utility. 

47.  The  regulation  of  rates. — In  recognition  of  the  futility 

of  attempting  to  fix  reasonable  rates  in  the  franchise  itself 
for  the  whole  period  to  be  covered  by  it,  there  has  been  a 
marked  tendency  of  late  years  to  reserve  to  the  city  the  right 
to  regulate  rates  from  time  to  time,  or,  without  any  such 
specific  reservation,  to  depend  upon  the  general  powers  of 
the  legislature  to  exercise  this  function  or  to  delegate  it  to 
the  local  authorities.  Of  course,  rates  cannot  be  diminished 
by  legislation  in  cases  where  they  have  been  fixed  by  a 
definite  and  valid  contract.  The  right  to  regulate  rates  is 
more  often  exercised  in  connection  with  gas  and  electric  com¬ 
panies  whose  franchises  are  silent  on  the  rate  question.  In 
New  York  this  power  was  formerly  exercised  by  the  state 
legislature,  but  has  recently  been  delegated  to  the  Public 
Service  Commissions.  In  California  the  right  to  regulate 
the  rates  of  water  and  light  companies  is  reserved  by  con¬ 
stitutional  provision  to  the  local  authorities.  In  all  cases 
where  the  legislative  body  attempts  to  regulate  charges,  it  is 
bound  to  make  them  fair  and  reasonable.  The  provision  of 
the  Fourteenth  Amendment  to  the  United  States  Constitu¬ 
tion  forbidding  any  state  to  deprive  a  citizen  of  life,  liberty 
or  property  “  without  due  process  of  law  ”  throws  the  whole 
question  of  rate  regulation  into  the  Federal  courts.  While 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  43 


no  exact  agreement  has  been  reached  as  to  what  may  he 
termed  a  “  reasonable  ”  rate,  there  is  a  disposition  on  the 
part  of  the  courts  to  hold  any  legislative  rate  confiscatory 
unless  it  is  sufficient  to  yield  to  the  company  a  net 
profit  of  at  least  six  per  cent  on  its  investment. 

That  brings  us  to  the  nub  of  the  problem,  namely,  what 
is  the  investment?  The  celebrated  80-cent  gas  case  recently 
decided  by  the  United  States  Supreme  Court,  involved  ques¬ 
tions  of  fundamental  importance  in  connection  with  rate 
regulation.1  The  Consolidated  Gas  Company  of  New  York 
claimed  that  the  present  value  of  its  real  estate  and  its  fran¬ 
chises  should  be  included  in  the  investment  upon  which  it 
was  entitled  to  a  reasonable  return.  The  court  held  that  the 
value  of  the  company’s  franchises  as  fixed  at  the  time  of  its 
formation  as  a  consolidation  of  the  seven  constituent  com¬ 
panies  in  1884  should  not  now  be  questioned  by  the  state, 
inasmuch  as  that  consolidation  was  effected  and  stock  covering 
the  franchises  was  issued  in  accordance  with  express  provi¬ 
sions  of  law.  The  Supreme  Court  refused,  however,  to  allow 
for  any  alleged  increase  in  the  company’s  franchise  values. 

“  This  corporation,”  said  the  court,  “is  one  of  that  class  which  is 
subject  to  regulation  by  the  Legislature  in  the  matter  of  rates,  provided 
they  are  not  made  so  low  as  to  be  confiscatory.  The  franchises  granted 
by  the  various  companies  and  held  by  complainant  (the  Consolidated 
Gas  Co. )  consisted  in  the  right  to  open  the  streets  of  the  city  and  lay 
down  mains  and  use  them  to  supply  gas,  subject  to  the  legislative  right 
to  so  regulate  the  price  for  the  gas  as  to  permit  not  more  than  a  fair 
return  (regard  being  had  to  the  risk  of  the  business)  upon  the  reason¬ 
able  value  of  the  property  at  the  time  it  is  being  used  for  the  public.” 

The  lower  court  had  estimated  the  increase  in  the  value  of 
the  franchises  since  1884  as  being  in  the  same  proportion  as 
the  increase  in  the  value  of  the  company’s  tangible  property. 
After  calling  attention  to  the  fact  that  several  of  the  con¬ 
stituent  companies  had  paid  annual  dividends  averaging  16 
per  cent  on  their  capital  stock  through  the  entire  period  from 
their  incorporation  to  the  date  of  consolidation,  the  Supreme 
Court  said: 

“  Real  estate  may  have  increased  in  value  very  largely,  as  also  the 
personal  property,  without  any  necessary  increase  in  the  value  of  the 
franchise.  Its  past  value  was  founded  upon  the  opportunity  of  obtain- 

1  January  4,  1909.  This  case  involved  an  appeal  by  the  Public  Service  Commis¬ 
sion,  the  City  of  New  York  and  the  Attorney  General  from  a  decision  of  the 
United  States  Circuit  Court,  declaring  the  80-cent  gas  law  unconstitutional. 


44 


MUNICIPAL  FRANCHISES. 


ing  these  enormous  and  excessive  returns  upon  the  property  without 
legislative  interference  with  the  price  for  the  supply  of  gas,  but  that 
immunity  for  the  future  was,  of  course,  uncertain  and  the  moment  it 
ceased  and  the  Legislature  reduced  the  earnings  to  a  reasonable  sum  the 
great  value  of  the  franchise  would  be  at  once  and  unfavorably  affected, 
but  how  much  so  it  is  not  possible  for  us  now  to  see.  The  value  would 
most  certainly  not  increase.  ” 

Nevertheless  the  court  held  that  the  $7,781,000  franchise 
valuation  fixed  in  1884,  should,  on  the  peculiar  facts  of  this 
case,  and  not  as  forming  a  precedent  for  the  valuation  of 
franchises  generally,  be  included  as  part  of  the  company’s 
property  upon  which  its  right  to  earn  a  reasonable  profit 
should  not  be  questioned  by  the  state.  In  another  paragraph 
the  court  said :  “  It  cannot  be  disputed  that  franchises  of  this 
nature  are  property  and  cannot  be  taken  or  used  by  others 
without  compensation.  The  important  question  is  always 
one  of  value.”  A  careful  examination  of  the  court’s  reason¬ 
ing  in  this  case  shows  an  element  of  inconclusiveness  which, 
it  was  hoped,  would  be  absent  from  this  decision.  The  court 
says  that  the  legislature  had  the  right  to  reduce  rates  to  a 
reasonable  sum  and  so  diminish  the  value  of  the  franchise,  but 
that  in  this  particular  case  although  it  may  have  diminished 
the  value  of  the  franchise  by  reducing  the  rates,  still  it  should 
not  so  reduce  the  rates  as  to  prevent  the  company  from  earn¬ 
ing  a  reasonable  profit  on  the  value  of  the  franchise  before  it 
was  reduced.  Moreover,  this  case  is  not  to  be  taken  as  a  prec¬ 
edent,  but  in  any  case  such  franchises  could  not  be  taken 
away  without  compensation.  The  fundamental  question  as 
to  whether  or  not  the  legislature  has  authority  by  regulating 
rates  to  wipe  out  the  value  of  a  franchise  as  a  special  privi¬ 
lege  was  answered  both  ways,  and  left  open  for  the  decision 
of  the  court  of  “  last  guess  ”  at  some  future  time. 

The  issue  is  so  momentous  that  we  need  hardly  be  sur¬ 
prised  at  the  court’s  hesitation  to  take  sides  once  for  all.  It 
is,  of  course,  obvious  that  a  franchise  sold  by  the  city  for  a 
lump  sum  represents  on  the  books  of  its  owner  a  legitimate 
capital  investment  to  that  amount.  But  when  a  franchise 
has  been  received  from  the  city  as  a  gift,  or  is  being  paid  for 
by  an  annual  rental  or  gross  receipts  tax,  it  is  anomalous 
that  the  rate-regulating  body  should  be  required  to  take  into 
account  its  value  in  estimating  the  capital  investment  upon 
which  a  reasonable  return  must  be  allowed.  The  value  of  the 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  45 


franchise  is  itself  determined  primarily  by  the  rates  that 
may  be  charged.  If  a  rate  reduction  that  would  impair  the 
value  of  the  franchise  is  confiscation,  then  the  whole  scheme 
of  rate  regulation  goes  a-glimmering,  and  the  franchise  holder 
is  entitled,  subject  to  his  contractual  limitations  as  expressed 
in  the  franchise  itself,  to  charge  whatever  rate  will  make  his 
franchise  most  valuable.  This  means  that  the  rates  will 
gravitate  toward  the  point  at  which  they  will  yield  the 
maximum  return,  without  reference  to  public  policy  or  the 
rights  of  the  consumer.  If,  on  the  other  hand,  the  Supreme 
Court  should  ultimately  decide  that  the  value  of  franchises 
need  not  be  included  in  a  valuation  of  investments  upon 
which  a  reasonable  profit  must  be  allowed,  the  way  will  then 
be  opened  for  the  practically  complete  resumption,  by  the 
public,  of  the  unearned  increment  in  franchise  values  through 
the  regulation  of  rates.  The  regulation  of  rates  is,  however, 
a  difficult  and  expensive  process,  especially  for  city  councils, 
which  are  not  usually  blessed  with  expert  assistance  and  the 
accumulation  of  knowledge  and  experience  requisite  for  just 
rate  making. 

With  reference  to  the  inclusion  of  the  unearned  increment 
of  real  estate  values  in  the  estimate  of  property  upon  which 
the  rate-regulating  authority  must  allow  a  fair  profit,  the 
decision  in  the  80-cent  gas  case  was  more  favorable  to  the 
company  than  on  the  question  of  franchise  values.  The 
court  held  “that  the  value  of  the  property  is  to  be  deter¬ 
mined  as  of  the  time  when  the  inquiry  is  made  concerning 
the  rates,”  and  added : 

“  If  the  property  which  legally  enters  into  the  consideration  of  the 
question  of  rates  has  increased  in  value  since  it  was  acquired,  the  com¬ 
pany  is  entitled  to  the  benefit  of  such  increase.  This  is,  at  any  rate, 
the  general  rule.  We  do  not  say  there  may  not  possibly  he  an  excep¬ 
tion  to  it,  where  the  property  may  have  increased  so  enormously  in 
value  as  to  render  a  rate  permitting  a  reasonable  return  upon  such  in¬ 
creased  value  unjust  to  the  public.” 

This  portion  of  the  decision  is  not  especially  important  so 
far  as  municipal  utilities  are  concerned,  except  in  great 
cities,  where  companies  occupying  land  of  extreme  value  may 
thereby  secure  the  right  to  maintain  high  rates.  If  a  com¬ 
pany  builds  its  power  house  or  its  gas  works  upon  land 
whose  value  is  later  immensely  enhanced  by  the  increase  of 


46 


MUNICIPAL  FRANCHISES. 


population  and  business,  and  if  the  company  is  entitled  to 
count  this  unearned  increment  of  land  value  as  a  part  of  its 
capital  investment  instead  of  being  required  to  treat  it  as 
undivided  surplus,  there  will  be  no  inducement  for  it  to 
move  its  plant  to  a  more  suitable  location  where  land  is 
cheaper. 

Aside  from  all  questions  of  law  as  to  the  items  that  should 
be  included  in  a  valuation  of  a  company’s  outfit,  it  is  clear 
that  the  first  requisite  for  the  regulation  of  rates  is  such  a 
valuation.  In  the  absence  of  publicity  of  accounts,  there  has 
been  almost  no  public  knowledge  of  the  cost  of  utility  plants. 
It  is  very  expensive  and  extremely  difficult,  even  with  the 
assistance  of  experts,  to  make  an  accurate  valuation  of  a 
street  railway  system  or  a  gas  plant  without  having  the  books 
thrown  open  to  the  last  detail.  Even  then  the  records  are 
likely  to  be  of  little  assistance  because  of  the  stock  watering 
and  the  juggling  of  accounts  in  the  past.  Without  complete 
and  accurate  knowledge  of  the  facts,  any  attempt  to  fix  rates 
is  but  a  stab  in  the  dark,  and  the  city  or  the  state  is  more 
than  likely  to  be  led  a  merry  chase  for  several  years  through 
the  Federal  courts,  only  to  find  at  last  that  the  rate  fixed  was 
a  little  too  low  and  consequently  void.  Meanwhile,  and  until 
further  action  is  taken  and  sustained,  the  consumers  pay  the 
original  rate  although,  even  by  the  terms  of  the  courts’  deci¬ 
sions,  that  rate  may  be  much  higher  than  is  necessary  or  just. 
Every  franchise  or  law  reserving  to  the  public  authorities  the 
right  to  regulate  rates  should  first  of  all  provide  for  publicity 
of  accounts.  In  addition,  it  should  either  fix  an  agreed-upon 
valuation  of  the  property  or  provide  the  definite  means  for 
making  a  scientific  appraisal  whenever  needed.  A  city 
council  that  hopes  to  limit  the  profits  of  a  monopoly  by  the 
exercise  of  its  statutory  or  reserved  right  to  regulate  rates, 
without  the  help  of  knowledge,  is  leaning  upon  a  broken 
reed. 

48.  The  imposition  of  special  taxes — If  in  the  fixing  of 
rates,  franchise  values  have  to  be  taken  into  consideration 
along  with  actual  investments,  it  is  still  possible  to  get  at  the 
monopoly  to  a  certain  extent  through  the  power  of  taxation. 
These  profits  have  generally  been  trimmed  a  little  in  the  case 
of  street  railways  by  the  exaction  of  car  license  fees.  This 
may  be  provided  for  in  the  franchise  or,  if  not,  may  be  fixed 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  47 


by  ordinance.  The  same  is  true  of  the  pole-tax  sometimes  im¬ 
posed  upon  telephone,  telegraph  and  electric  light  companies. 
The  theory  of  these  exactions  is  that  the  cars  and  the  poles 
place  a  special  burden  on  the  streets  and  may  therefore  be 
subjected  to  a  special  tax  or  license  fee.  In  the  District  of 
Columbia  Congress  has  imposed  upon  street  railway,  gas,  elec¬ 
tric  light  and  telephone  companies  a  special  tax  on  gross  re¬ 
ceipts  in  lieu  of  the  ordinary  tax  on  personal  property,  but 
they  are  also  subject  to  ordinary  taxes  on  real  estate. 

A  gross  receipts  tax  should  be  distinguished  from  a  percent¬ 
age  of  gross  receipts  paid  by  a  company  in  accordance  with 
the  terms  of  its  franchise  and  as  compensation  for  it.  In 
the  absence  of  special  constitutional  obstacles,  the  tax  may 
be  levied  by  the  legislature,  or  by  the  city  council  under 
legislative  authority  without  regard  to  the  terms  of  the 
franchise.  The  distinction  referred  to  here  is  important, 
inasmuch  as  many  people  seem  to  think  that  public  service 
corporations,  after  being  compelled  to  pay  for  their  franchises, 
should  be  relieved  of  the  burden  of  paying  taxes  on  them. 
The  fallacy  of  this  position  is  seen  at  once,  if  we  suppose  that 
the  city  is  selling,  not  a  franchise,  but  a  piece  of  real  estate. 
Certainly  no  man  would  expect  to  go  scot  free  of  taxation 
just  because  he  had  bought  a  piece  of  property  and  paid  for 
it.  The  confusion  arises  from  the  memory  of  the  past  when 
franchises  were  given  away  and  were  not  recognized  as 
property  subject  to  taxation.  The  injustice  of  the  old  policy 
was  a  double  one.  Instead  of  relieving  a  corporation  from 
taxation  because  it  had  paid  for  its  property,  the  public  re¬ 
lieved  it  from  taxation  because  it  had  got  its  property  for 
nothing.  When  the  public  “  puts  the  screws  on  ”  and  under¬ 
takes  to  cut  away  entirely  the  franchise  holder’s  special 
privilege,  there  is  naturally  a  considerable  outcry  and  some¬ 
thing  of  a  panic. 

Some  states  and  cities  impose  this  specific  gross  receipts  tax 
as  the  simplest  and  easiest  tax  to  levy  and  collect.  This  plan 
avoids  the  necessity  of  an  expert  valuation  of  intangible 
property  such  as  franchises,  patent  rights,  good  will,  etc. 
On  the  other  hand  some  states  and  cities  treat  public  service 
enterprises  like  other  forms  of  property.  The  real  estate, 
machinery,  equipment,  etc.,  i.  e.,  all  the  tangible  property,  are 
assessed  for  taxation  in  the  usual  way.  But  in  addition  to 


48 


MUNICIPAL  FRANCHISES. 


this  an  effort  is  made  to  arrive  at  the  true  value  of  the 
special  privileges  resulting  from  the  possession  of  a  practically 
exclusive  franchise  to  engage  in  the  street  railway,  gas,  or 
other  utility  business.  Of  course,  if  franchises  have  never 
been  taxed,  their  value  will  be  greatly  reduced  by  the  imposi¬ 
tion  of  taxation  at  regular  rates.  If  the  average  rate  of 
return  on  untaxed  capital  is  six  per  cent,  then  a  tax  of  two 
per  cent  will  diminish  the  value  of  the  capital  by  approxi¬ 
mately  one-third.  It  is  on  this  account  that  special-franchise 
taxes  are  an  important  means  of  limiting  the  profits  of 
franchise  monopolies.  But  even  this  remedy  for  past  in¬ 
justice,  drastic  as  it  may  appear  in  some  cases,  is  after  all 
nothing  but  the  application  of  the  ordinary  principles  of 
equal  taxation,  and  does  not  affect  the  monopoly  privilege  to 
render  a  common  service  at  rates  unregulated  by  competi¬ 
tion.  Unless  the  specific  taxes  imposed  upon  public  utilities 
are  exceptionally  burdensome,  or  the  valuation  of  the  franchise 
includes  other  elements  than  monopoly  privilege,  profits  will 
not  be  limited.  The  only  way  actually  to  resume  franchise 
values  through  taxation  without  resorting  to  discrimination  is 
to  apply  the  principles  of  the  single  tax  and  gradually  shift 
upon  land  and  land  rights,  which  include  franchises,  the  whole 
burden  of  supporting  the  government.  In  this  way  franchise 
values  for  purposes  of  transfer  or  profit  could  be  made  to 
disappear  entirely,  but  only  in  the  same  proportion  that  land 
values  generally  disappeared.  In  other  words,  the  imposition 
of  special  taxes  upon  public  utilities,  whether  in  the  form  of 
car  license  fees,  pole  taxes,  a  gross  receipts  tax  or  a  franchise 
tax,  unless  these  taxes  are  unjustly  and  especially  oppres¬ 
sive,  will  not  pull  the  sting  of  the  monopoly. 

For  the  sake  of  safety  and  to  avoid  possible  misunderstand¬ 
ing  and  litigation,  a  franchise  may  well  contain  specific  pro¬ 
visions  fixing  car  license  fees,  pole  taxes  and  other  special 
contributions  so  as  to  cover  the  special  expenses  imposed  upon 
the  city  by  the  presence  of  these  obstructions  in  the  streets. 
In  regard  to  taxation  proper  the  only  thing  to  be  said  in  the 
franchise  is  that  all  the  property  and  rights  of  the  franchise 
holder  shall  be  subject  to  taxation  or  exemption  from  it  under 
the  general  laws.  This  will  not  deprive  the  franchise  holder 
of  his  special  privileges,  but  will  keep  him  from  claiming 
what  may  be  termed  the  special  special-privilege  of  having  a 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  49 

special  privilege  without  having  to  pay  taxes  on  its  value, 
whatever  that  may  be  under  the  conditions  subject  to  which 
it  is  exercised. 

49.  Special  obligations  imposed  in  franchise  grants. — It 

is  not  unusual  in  franchise  grants  to  require  telephone  com¬ 
panies  to  furnish  a  certain  amount  of  service  to  the  city  free 
of  charge.  Electric  light  companies  are  sometimes  required 
to  furnish  free  lights,  but  more  often  to  provide  room  on 
their  poles  or  in  their  conduits  for  the  city’s  police  signal  and 
fire  alarm  wires.  It  is  sometimes  stipulated  that  street  rail¬ 
way  companies  shall  carry  policemen,  firemen  or  other  public 
employees  free  of  charge.  When  the  franchise  holder  is  not 
obliged  to  render  a  considerable  amount  of  service  free,  pro¬ 
vision  may  be  made  for  exceptionally  low  rates  to  the  city. 

The  most  important  special  obligations  imposed  upon  pub¬ 
lic  utility  companies  are  the  obligations  of  street  railway  com¬ 
panies  to  pave  and  repair  the  surface  of  the  streets  between 
and  about  their  rails,  to  clear  and  sprinkle  the  streets  and  to 
remove  snow  and  ice  from  the  tracks  in  winter.  The  im¬ 
portance  of  such  obligations  is  well  illustrated  in  the  case  of 
Philadelphia  where  under  the  new  street  railway  agreement, 
in  effect  July  1,  1907,  the  city  commuted  the  old  franchise 
obligations  of  the  companies  with  reference  to  paving,  snow 
removal  and  car  license  fees  for  a  cash  payment  of  $500,000 
a  year  for  the  first  ten  years,  the  annual  payment  to  be  in¬ 
creased  by  $50,000  for  each  succeeding  ten-year  period  until 
1957.  The  city  has  been  compelled  to  appropriate  the  entire 
sum  of  $500,000  a  year  to  meet  the  paving  obligations  of 
which  the  companies  were  relieved  by  this  settlement.1  In 
Philadelphia,  however,  the  paving  obligation  imposed  on  the 
companies  by  the  old  franchises  was  an  unusual  one  in  that 
it  required  them  to  maintain  the  street  from  curb  to  curb. 
In  its  usual  form  this  obligation  extends  only  to  that  portion 
of  the  street  between  the  rails  and  tracks  and  one  foot, 
eighteen  inches  or  two  feet  on  either  side. 

Ordinarily  the  special  obligations  imposed  upon  a  company 
by  the  terms  of  its  franchise  represent  concessions  obtained 
by  the  city  authorities  in  a  more  or  less  unintelligent  dicker. 
The  city  wants  something  for  the  franchise  and  the  company 

1  See  “  Philadelphia's  Relation  to  Rapid  Transit  Company by  Edwin  O.  Lewis, 
in  Annals  of  the  American  Academy  of  Political  and  Social  Science,  May,  190«, 
p.  76. 


50 


MUNICIPAL  FRANCHISES. 


offers  to  assume  a  number  of  duties  each  one  comparatively 
trivial  in  itself,  but  possibly  much  desired.  The  city  gen¬ 
erally  has  no  clear  idea  as  to  what  the  paving  obligation 
amounts  to,  how  much  it  will  cost  to  remove  snow  from  the 
tracks  or  to  sprinkle  them,  or  how  much  free  rides  for  police¬ 
men  and  firemen  will  burden  the  company.  The  company 
wants  the  franchise ;  in  fact  must  have  it  in  order  to  do  busi¬ 
ness.  The  aldermen  think  of  some  little  things  they  want 
done  for  nothing.  The  parties  strike  a  bargain ;  and  neither 
side  knows  how  much  the  obligations  assumed  will  amount  to. 
It  is  poor  policy  to  load  up  a  franchise  with  a  lot  of  miscel¬ 
laneous  obligations  of  this  sort.  Free  services  of  uncertain 
amount  should  be  eliminated.  A  street  railway  may  reason¬ 
ably  be  required  to  meet  the  expense  of  performing  certain 
duties,  such  as  paving  and  keeping  the  roadbed  clean  and  in 
repair.  It  may  even  be  advisable  to  require  the  company  to 
sprinkle,  either  at  its  own  expense  or  at  cost,  the  entire  width 
of  the  street  it  occupies.  It  is  also  proper  to  require  the 
company  to  pay  the  expenses  of  widening  a  street,  strengthen¬ 
ing  a  bridge  or  making  other  changes  in  the  roadway  rendered 
necessary  by  the  additional  servitude  imposed  by  the  fran¬ 
chise.  An  electric  light  or  telephone  company  may  reason¬ 
ably  be  required  to  reserve  space  on  its  poles  or  in  its  conduits 
for  city  wires,  but  this  obligation  should  not  be  made  unneces¬ 
sarily  onerous  by  keeping  the  spaces  unused  for  years  when 
not  needed  by  the  city. 

Every  obligation  the  amount  of  which  cannot  be  closely 
estimated  in  advance  should  be  avoided.  For  any  looseness 
in  the  arrangement  will  almost  of  necessity  operate  in  favor 
of  the  company,  which  is  compelled  to  cover  in  other  ways 
the  risk  it  assumes.  It  is  proper,  however,  that  companies 
operating  in  the  streets  should  assume  liability  for  all  dam¬ 
ages  caused  by  their  operations,  either  in  the  construction 
and  maintenance  of  their  fixtures,  or  in  the  actual  work  of 
supplying  the  service.  This  is  of  especial  importance  to  the 
city  in  cases  where  injury  results  to  persons  or  property  by 
reason  of  the  streets  being  torn  up  or  obstructed  by  the  com¬ 
pany.  Finally,  apart  from  requiring  the  franchise  holder  to 
abate  the  nuisances  he  creates,  repair  the  damages  he  does 
and  assume  to  the  full  extent  the  obligations  that  normally  at¬ 
tach  to  the  business  he  is  doing,  the  city  should  not  attempt 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  51 

to  limit  profits  by  imposing  the  obligation  upon  the  franchise 
holder  to  perform  a  multitude  of  miscellaneous  services  free 
or  at  reduced  rates  as  a  sort  of  bonus  for  his  right  to  operate. 

50.  Improved  service  required. — If  those  who  are  re¬ 
sponsible  for  drafting  a  franchise  regard  good  service  more 
important  than  compensation  or  low  rates,  monopoly  profits 
may  be  limited  effectively  by  the  requirement  of  specific  im¬ 
provements  in  the  service.  For  example,  if  it  is  street  rail¬ 
ways  that  are  concerned,  a  change  of  motive  power,  free 
transfers,  through  routes  and  joint  use  of  tracks  may  be  re¬ 
quired.  The  company  may  be  compelled  to  improve  its  road¬ 
bed,  to  furnish  a  seat  for  every  passenger,  to  heat  and 
ventilate  its  cars,  and  to  light  them  so  that  passengers  will 
be  able  to  read  without  straining  their  eyes.  The  abolition  of 
strap-hanging  would  alone  be  a  body-blow  to  monopoly  pro¬ 
fits  in  street  railway  operations.  If  electric  light  and  power 
is  the  utility  in  question,  the  franchise  may  require  the  com¬ 
pany  to  stand  ready  to  supply  break-down  service  to  private 
consumers  having  power  plants  of  their  own  and  may  in¬ 
clude  special  provisions  to  insure  uninterrupted  service, 
adequate  fixtures  and  clear  light.  A  telephone  franchise  may 
call  for  the  installation  of  the  automatic  system,  secrecy  of 
conversations,  adequate  connections  for  long  distance  service, 
etc.  For  gas,  the  requirement  may  be  a  higher  candle  power, 
a  regulated  pressure,  the  prompt  repair  of  fixtures  and  the 
stoppage  of  leaks.  It  can  readily  be  seen  that  service  in  al¬ 
most  any  utility  is  capable  of  indefinite  improvement. 
Though  some  improvements  are  profitable  to  the  company, 
others  can  be  had  only  at  a  sacrifice  of  its  profits.  A  fran¬ 
chise  cannot,  of  course,  elaborate  in  detail  all  of  the  improve¬ 
ments  that  may  prove  desirable  in  the  course  of  a  generation. 
All  that  should  be  attempted  is  to  set  certain  general  stand¬ 
ards  of  service  to  be  required  of  the  franchise  holder,  and  then 
reserve  to  the  public  authorities  the  right  to  compel  specific 
improvements  in  the  service  from  time  to  time  by  law,  ordi¬ 
nance  or  administrative  order. 

51.  Extensions  into  unprofitable  territory — From  the 
public  standpoint  it  is  extremely  important  that  public  utility 
services  should  be  available  over  as  wide  an  area  as  possible. 
Such  a  policy  tends  to  send  population  to  the  suburbs,  in¬ 
crease  the  size  of  the  average  building  lot,  multiply  open 


52 


MUNICIPAL  FRANCHISES. 


places  and  enlarge  the  total  value  of  the  land  on  the  tax-roll. 
But  profits  come  most  readily  from  congested  business.  The 
denser  the  population  the  better  for  the  water,  gas  and  electric 
light  companies,  and  the  shorter  the  average  haul  the  better 
for  the  street  railway  companies.  A  scattered  population  may 
render  the  use  of  telephones  more  general,  but  it  also  greatly 
increases  the  length  and  maintenance  expenses  of  the  lines. 
It  can  readily  be  foreseen  that  this  conflict  of  interests  be¬ 
tween  the  companies  and  the  public  must  lead  to  important 
results.  If  a  street  railway  company  is  granted  locations  in 
certain  streets  with  no  provision  for  the  extension  of  its  lines 
from  time  to  time,  there  is  certain  to  come  a  period  after 
population  has  pressed  out  beyond  the  end  of  the  established 
routes  when  people  in  the  outskirts  will  suffer  hardship  for 
want  of  adequate  transportation  facilities.  If  the  company 
finds  that  after  walking  for  half  a  mile  these  people  will  have 
to  take  the  cars  anyway  in  order  to  get  down  town,  it  will  be 
very  slow  to  extend  its  tracks  to  meet  them,  especially  as  they 
would  not  have  to  pay  any  more  for  the  long  ride  than  they 
do  for  the  shorter  one.  Public  service  corporations  handling 
other  utilities  are  sometimes  disposed  to  let  scattered  sub¬ 
urban  populations  go  without  service  altogether  rather  than 
incur  the  expense  of  extending  their  lines  for  the  limited 
business  they  would  receive.  Indeed,  with  utilities  like  elec¬ 
tric  light  and  the  telephone,  which  in  the  poorer  sections  of  a 
city  are  used  by  only  a  small  minority  of  the  people,  it  is 
quite  possible  that  a  person  residing  almost  in  the  heart  of  a 
great  city  may  desire  service  and  not  he  able  to  get  it. 

From  these  facts  we  can  see  that  one  of  the  most  effective 
ways  to  limit  profits  is  to  insert  into  the  franchise-grants 
adequate  requirements  for  extensions.  The  necessity  for  any 
extension  might  be  left  entirely  to  the  discretion  of  the  city 
council,  but  such  a  plan  would  meet  the  violent  opposition 
of  the  franchise-seeker.  He  would  be  very  loath  to  subject 
himself  to  possible  financial  ruin  at  the  whim  of  a  body  of 
aldermen.  Sometimes,  however,  franchise  holders  agree  to 
extend  their  lines  at  the  beck  of  the  aldermen,  if  the  length 
of  the  extensions  that  may  be  required  within  any  one  year 
is  definitely  limited.  It  is  possible,  however,  to  fix  in  the 
franchise  certain  definite  rules  by  which  the  necessity  of  any 
proposed  extensions  may  he  determined.  Extensions  may  be 


MONOPOLY  PROFITS.  AND  WAYS  OF  LIMITING  THEM.  53 


required  upon  petition  of  the  majority  in'number  or  interest 
of  the  people  living  on  a  particular  street  or  in  a  particular 
district.  The  law  frequently  requires  gas  and  electric  com¬ 
panies  to  supply  any  person  whose  place  is  within  a  certain 
number  of  feet,  perhaps  100  or  150,  of  their  mains.  Some¬ 
times  the  extension  of  the  lines  to  supply  a  district  in  which 
the  company  is  guaranteed  a  certain  amount  of  business  in 
advance  is  mandatory.  Extensions  may  be  required  into  ter¬ 
ritory  having  a  certain  density  of  population.  Or  the  whole 
matter  of  the  reasonableness  of  an  order  for  extensions  may 
be  left  to  arbitration  or  to  the  determination  of  the  courts 
after  a  judicial  inquiry  into  the  financial  prospects  of  the  ex¬ 
tension.  It  can  hardly  be  expected  that  a  company  would 
accept  a  franchise  reserving  to  the  city  the  unlimited  right 
to  compel  extensions  without  reference  to  their  cost  or  the 
probable  business  to  be  received  from  them.  It  might  not 
be  amiss,  however,  to  require  extensions  wherever  the  im¬ 
mediate  or  guaranteed  gross  income  from  them  will  pay  the 
current  rate  of  interest  on  their  cost.  There  will  usually 
be  a  comparatively  slight  increase  in  operating  expenses  any¬ 
way,  and  such  as  there  is  may  safely  be  taken  from  surplus 
profits  until  it  is  met  by  the  development  of  additional  busi¬ 
ness.  If  a  franchise  is  exceptionally  profitable,  and  the 
public  demand  for  unprofitable  extensions  is  acute,  the  com¬ 
pany  may,  as  a  matter  of  understood  public  policy,  be  re¬ 
quired  to  cut  deeply  into  profits  to  carry  extensions  that  do 
not  pay.  But  this  requirement  should  not  be  left  indefinite; 
the  extensions  required  should  be  limited  to  a  certain  amount 
per  annum,  or  to  a  certain  proportion  of  surplus  profits. 

52.  A  uniform  rate  without  a  minimum  charge. — The 
problem  of  minimum  charges  does  not  present  itself  in  the 
case  of  street  railways,  or  in  the  case  of  water  works  and 
telephones  where  an  unlimited  service  is  furnished  at  a  flat 
rate.  In  all  cases,  however,  where  the  consumer  pays  accord¬ 
ing  to  the  amount  of  the  commodity  used  by  him,  or  the  serv¬ 
ice  he  receives,  the  cost  of  rendering  the  service  is  frequently 
greater  than  the  return  would  be  if  reckoned  at  the  regular 
rates.  Accordingly  the  companies  often  have  a  system  of 
“  meter  ”  charges  or  minimum  charges  by  which  they  aim 
to  recover  from  every  consumer,  no  matter  how  little  he  uses, 
the  cost  of  maintaining  the  service,  keeping  the  account. 


54 


MUNICIPAL  FRANCHISES. 


reading  the  meter,  etc.  If  it  appears  sufficiently  important  to 
encourage  the  general  use  of  a  utility,  the  city  or  state  may 
insist  upon  the  Post  Office  principle  of  a  uniform  rate  to 
everybody,  thus  compelling  the  profitable  part  of  the  business 
to  carry  the  part  that  is  not  profitable. 

At  the  other  end  of  the  scale  the  companies  sometimes  find 
it  profitable  to  grant  wholesale  rates  on  a  large  consumption. 
Retail  rates  would  bring  in  a  greater  return,  if  they  brought 
the  same  amount  of  business.  But  they  do  not.  Electricity 
and  gas  may  be  used  for  power  in  large  quantities  if  they 
can  be  had  at  sufficiently  low  rates,  but  in  many  cases  would 
not  be  available  at  all  at  the  retail  rates  for  lighting.  At 
the  same  time  the  companies  may  be  in  a  position  to  reap 
an  additional  profit  from  the  supplying  of  their  surplus 
product  at  very  low  rates.  The  enforced  abolition  of  the 
wholesale  rate  would  curtail  their  production  and  substan¬ 
tially  reduce  their  possible  profits.  Generally  speaking,  pub¬ 
lic  utilities  are  in  such  widespread  demand  that  good  public 
policy  would  tend  to  favor  the  maintenance  of  a  uniform 
rate  per  unit  of  service  to  all  consumers  irrespective  of  the 
amounts  they  use.  There  is  a  general  tendency,  however,  to 
admit  the  wholesale  principle,  on  condition  that  there  is  to  be 
no  discrimination  among  individuals  in  the  same  class.  It 
is  sometimes  suggested  that  while  a  uniform  rate  per  unit 
of  commodity  used  for  the  same  general  purpose  is  sound 
politics,  a  difference  may  reasonably  be  granted  where  the 
commodity  is  used  for  another  purpose.  For  example,  it 
is  urged  that  although  gas  or  electricity  for  light  should  be 
supplied  at  a  uniform  rate  no  matter  how  great  the  quantity 
used,  a  different  and  lower  rate  might  appropriately  be  estab¬ 
lished  for  gas  heating  or  electric  power.  However  this  may 
be,  the  rate  per  unit  should  be  the  same  to  all  consumers  for 
every  separate  use.  While  a  small  minimum  charge  for  the 
service  is  not  likely  to  work  any  great  hardship  on  the  small 
consumers,  the  better  policy  is  to  abolish  all  rate  discrim¬ 
ination  based  on  the  amount  consumed.  It  is  not  for  the  gov¬ 
ernment  to  authorize  the  use  of  a  public  franchise  in  such  a 
way  as  to  favor  the  large  consumer.  The  doctrine  of  compar¬ 
ative  cost  does  not  apply.  The  city  should  equalize  prices  for 
big  and  little  alike.  If  variations  in  rates  are  to  be  permitted 
according  to  the  use  of  the  commodity,  the  franchise  should 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  55 

very  carefully  draw  the  line  between  such  uses  so  that  any 
possible  misunderstanding  may  be  avoided.1 

53.  Better  treatment  of  employees  required. — The 
profits  of  a  public  service  corporation,  like  those  of  any  other 
concern,  depend  not  only  upon  revenues  but  also  upon  ex¬ 
penditures.  A  public  service,  touching  as  it  does  the  lives 
of  the  people  in  manifold  ways,  is  fraught  with  unusual 
danger  unless  intelligently  operated.  It  requires  carefulness, 
accuracy  and  a  steady  hand  to  handle  gas,  electricity  and 
transportation  with  efficiency  and  safety.  The  responsibility 
of  motormen  and  conductors  operating  cars  in  the  crowded 
streets  is  one  to  appal  the  stoutest  hearts.  The  mere  possi¬ 
bility  of  catching  a  young  child  under  the  wheels,  grinding  his 
body  to  pulp  and  carrying  it  several  miles  before  the  accident 
is  discovered,  as  happened  recently  in  a  case  in  New  York 
City,  is  too  terrible  to  permit  any  man  fit  for  the  job  to 
undertake  the  handling  of  an  electric  car  with  a  light  heart. 
The  work  of  those  who  repair  high  tension  electric  wires 
and  are  constantly  within  a  touch  of  death,  is  such  as  to 
appeal  only  to  brave  men  or  to  reckless  ones.  If  employees 
are  of  the  latter  class,  the  danger  is  transmitted  to  the  public. 
The  public  is  more  deeply  concerned  with  the  treatment  of 
public  service  employees  than  in  the  case  of  an  ordinary  com¬ 
petitive  business.  The  special  circumstances  just  described 
and  many  others,  coupled  with  the  vital  public  necessity  of 
uninterrupted,  efficient,  safe  service,  make  it  necessary  that 
special  measures  should  be  taken  by  the  public  authorities 
on  behalf  of  the  employees  of  public  service  corporations. 
Such  measures  may  take  the  form  of  a  guaranty  of  a  mini¬ 
mum  wage,  or  the  requirement,  for  example,  that  street  cars 
should  be  vestibuled  to  protect  drivers  and  motormen  from 
undue  exposure,  or  that  no  employee  shall  be  compelled  to 
work  more  than  a  certain  number  of  hours  at  a  stretch. 

A  public  service  corporation  operating  under  a  monopoly 
franchise,  has  a  special  advantage  over  many  classes  of  its 
employees.  If  they  lose  their  jobs,  or  quit  them,  there  is  no 
chance  of  getting  similar  work  except  by  moving  to  another 
city.  On  the  other  hand,  the  men  may  form  a  close  organ¬ 
ization  and  extort  concessions  from  their  employers  by 
reason  of  the  necessity  the  latter  are  under  of  furnishing 

1  For  further  discussion  of  discrimination  in  rates,  see  section  72.  post. 


56 


MUNICIPAL  FRANCHISES. 


continuous  service  to  hold  their  franchises.  This  advantage 
of  the  men  is  sometimes  diminished  by  the  insertion  of 
clause  in  the  franchise  exempting  the  company  from  the  ordi¬ 
nary  penalties  for  non-performance  of  its  contractual  obli¬ 
gations  if  prevented  by  strikes.  A  bill  was  introduced  in  the 
Massachusetts  legislature  in  1908  to  require  all  public  serv¬ 
ice  corporations  to  adopt  the  plan  of  distributing  surplus 
profits,  over  and  above  a  fixed  return  on  invesment,  among 
the  stockholders  and  employees  in  proportion  to  dividends  and 
wages.  Such  a  scheme  naturally  concerns  the  general  law 
regulating  such  corporations,  rather  than  the  specific  fran¬ 
chises  granted  to  individual  companies.  It  is  hardly  to  be 
considered  good  public  policy  to  load  down  the  franchise  with 
specific  provisions  regulating  the  relations  of  the  companies 
with  their  employees  The  power  should  be  reserved  to  the 
state  or  the  city  to  adopt  such  regulations  from  time  to  time 
as  changing  conditions  may  require,  and  it  is  not  unreasonable 
in  a  franchise  to  provide  for  arbitration  of  labor  disputes. 
Whatever  can  be  put  into  a  franchise  to  insure  uninterrupted 
service  by  careful,  intelligent,  thoroughly  trained  men,  is 
not  only  justifiable  but  positively  to  be  desired. 

54.  Controlling  the  company’s  contracts. — In  connec¬ 
tion  with  the  operation  of  public  utilities  there  is  frequently 
a  double  monopoly  profit.  Patents  in  connection  with  the 
manufacture  of  gas,  the  production  of  electric  light,  the  puri¬ 
fication  of  water,  the  furnishing  of  telephone  service,  etc., 
are  often  controlled  by  a  holding  or  “  parent  99  company  which 
has  special  relations  with  a  multitude  of  operating  companies 
in  different  parts  of  the  country.  Notable  instances  are  the 
General  Electric  Company  and  the  American  Telephone  and 
Telegraph  Company.  The  latter  is  both  an  operating  and  a 
holding  company.  A  “  parent 99  company  may  dictate  the 
terms  of  the  contract  under  which  an  operating  company 
receives  the  right  to  use  certain  patents  of  more  or  less  value. 
If  the  use  of  the  patented  process  or  article  is  essential  to  the 
business  the  patent  itself  will  enable  the  “  parent  ”  company 
to  mulct  the  operating  company  and  through  it  the  consumers 
for  large  tribute.  If,  on  the  other  hand,  the  patents  are  not 
essential  and  have  value  only  in  name,  the  parent  company 
can  attain  the  same  result  by  means  of  its  stock  control  over 
the  operating  companies.  “  Addition,  division  and  silence 99 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  57 

is  a  famous  rule  especially  applicable  to  such  transactions. 
This  rule  also  applies  to  numerous  cases  where  the  controlling 
company  is  the  manufacturing  company  and  sells  the  desired 
commodity,  such  as  gas  or  electrical  energy,  to  its  subsidiary 
operating  companies.  By  a  judicious  arrangement  between 
pockets,  the  cost  of  gas,  electric  power,  street  railway  equip¬ 
ment,  or  what  not,  may  be  kept  conveniently  high  in  order 
to  justify  higher  rates.  There  is  danger  of  extortion  through 
the  collusion  of  two  companies,  only  one  of  which  is  di¬ 
rectly  responsible  for  the  ownership  of  the  franchise  and  oper¬ 
ation  under  it.  It  should  be  required  in  every  franchise  that 
the  contracts  of  the  holder  be  made  public,  and  that  contracts 
for  the  supply  of  a  commodity  by  one  public  utility  company 
to  another  should  be  void  unless  approved  either  by  a  com¬ 
mission  or  by  the  franchise-granting  authority  itself.  This 
is  a  matter  of  great  importance.  Unless  some  such  control 
is  vested  in  the  public  authorities,  publicity  of  accounts, 
valuation  of  plant  and  the  right  to  regulate  rates  are  likely 
to  be  rendered  ineffective  through  the  familiar  hide-and-seek 
tactics  of  the  corporations,  wheel  within  wheel. 

55.  The  sliding  scale  device — A  special  plan  for  limit¬ 
ing  monopoly  profits  has  been  adopted  in  the  case  of  the 
Boston  Consolidated  Gas  Company.  A  standard  rate  to  the 
consumer  and  a  standard  rate  of  dividend  on  the  com¬ 
pany’s  stock  were  fixed.  It  was  then  agreed  that  the  company 
could  not  increase  its  dividend  rate  unless  it  had  previously 
reduced  its  charges  for  gas.  For  every  five  cents  decrease  in 
the  rate  of  charge  per  1000  feet  below  the  standard,  the  com¬ 
pany  is  permitted  to  add  one  per  cent  to  its  dividend  rate. 
This  scheme  of  limiting  profits  seems  to  find  considerable 
favor  among  corporation  men.  It  starts  out  with  a  guaranty 
that  they  shall  not  be  disturbed  by  rate  regulation  ordinances 
to  the  extent  of  endangering  their  ability  to  pay  a  regular 
liberal  dividend.  It  continues  by  guaranteeing  to  them  a 
steady  share  in  the  profits  of  economy  or  cheaper  processes. 
The  plan  would  certainly  tend  to  make  the  companies  zealous 
to  reduce  costs  and  to  lower  rates.  It  might  not  encourage 
them  to  improve  service  except  when  the  improvement  would 
bring  immediate  financial  returns.  If  this  idea  is  to  be 
embodied  in  a  franchise,  great  care  should  be  taken  in  fixing 
the  basis  of  rates  both  for  charges  to  consumers  and  for 


58 


MUNICIPAL  FRANCHISES. 


dividends.  Starting  with  high  rates  in  both  cases,  the  plan 
would  operate  unreasonably  well  for  the  companies.  Suppose, 
for  example,  that  with  a  price  of  80  cents  per  1000  cubic  feet 
for  gas,  the  company  can  earn  a  net  annual  dividend  of  six 
per  cent  on  the  capital  invested.  If,  in  fixing  the  terms  of  a 
franchise  on  the  sliding  scale  plan,  the  basic  rate  of  charge  for 
gas  is  established  at  90  cents  and  the  basic  rate  for  dividends  at 
8  per  cent,  the  company  by  reducing  the  price  of  gas  5  cents, 
will  be  entitled  to  pay  nine  per  cent  dividends.  That  is  to 
say,  the  price  to  the  consumer  may  be  kept  above  the  normal 
while  dividends  also  are  far  above  the  normal.  It  is  true  that 
the  desire  for  still  greater  profits  would  stimulate  the  move¬ 
ment  toward  lower  charges  for  gas.  The  self-interest  of  the 
companies  would  ally  itself  with  the  public  interest,  to  a 
certain  extent,  but  an  exorbitant  profit  would  be  allowed 
without  the  necessity  of  reducing  rates  to  a  reasonable  basis. 
If,  on  the  other  hand,  the  basic  rates  for  gas  and  for  dividends 
were  fixed  too  low,  the  scheme  would  work  with  double  force 
against  the  company.  The  value  of  the  whole  scheme  depends 
upon  getting  the  rates  right  in  the  first  place.  Even  then, 
however,  changes  in  the  value  of  money  or  in  the  cost  of  pro¬ 
duction  will  essentially  change  the  normal  standard  rate.  A 
great  increase  or  decrease  in  cost  may  take  place  entirely  in¬ 
dependent  of  the  skill  and  diligence  displayed  by  the  com¬ 
pany.  And  so  the  justice  of  the  fixed  basic  rates  is  likely 
to  be  upset.  Accordingly  the  sliding  scale  plan  is  likely  to 
work  hardship  either  to  the  city  or  the  company,  unless 
provision  is  made  for  the  readjustment  of  the  basic  rates  from 
time  to  time  to  correspond  with  changes  in  cost  over  which 
the  company  has  no  responsible  control. 

56.  Division  of  profits  with  the  city — Under  the  laws  of 
Rhode  Island  and  Massachusetts,  street  railway  companies  are 
required  to  pay  a  special  tax  on  dividends  equal  in  amount 
to  the  excess  of  dividends  paid  over  a  fixed  rate.  This  plan 
means  in  substance  that  the  company  must  share  its  profits 
with  the  city,  half  and  half,  above  a  rate  of  profit  considered 
reasonable  on  the  par  value  of  the  capital  stock.  This  does 
not  establish  the  value  of  the  property  or  the  total  amount  of 
the  investment  as  the  basis  for  determining  profits.  If  the 
company  is  grotesquely  overcapitalized,  a  five  per  cent  divi¬ 
dend  on  the  capital  stock  outstanding  may  mean  a  consider- 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  59 

ably  higher  rate  on  the  total  actual  investment,  including  that 
portion  secured  by  the  issue  of  bonds.  Any  division  of  sur¬ 
plus  profits  between  the  company  and  the  city  should  be  based 
upon  a  certain  fixed  rate  of  return,  not  on  capital  stock 
but  on  actual  investment.  The  new  Chicago  street  railway 
franchises  are  based  upon  this  latter  principle.  The  invest¬ 
ment  value  of  the  properties  is  fixed  in  each  franchise,  and 
provision  is  made  for  keeping  a  complete  check  upon  future 
additions  to  investment.  The  normal  rate  of  profit  is  then 
fixed  at  approximately  the  rate  of  interest  on  the  company’s 
bonds.  In  the  Chicago  scheme  net  surplus  profits  are  divided 
in  the  ratio  of  55  per  cent  to  the  city  and  45  per  cent  to  the 
company.  The  plan  of  dividing  net  surplus  profits  will  not  be 
satisfactory  unless  there  is  provided  in  the  franchise  or  by 
legislation  adequate  means  by  which  the  city  or  the  state  may 
exercise  a  definite  control  over  accounts  and  expenditures.  It 
is  often  urged  in  support  of  the  plans  for  limiting  profits  des¬ 
cribed  in  this  paragraph  that  the  city,  furnishing  the  franchise 
under  which  the  utility  is  operated,  should  have  a  “  fair 
share”  in  the  profits  of  the  enterprise.  It  is  urged  that  by 
this  scheme  the  independence,  energy  and  ability  of  private 
management  will  be  maintained,  while  at  the  same  time  the 
interests  of  the  public  are  conserved.  If  the  minimum  rate 
of  profit  is  low  enough  and  is  based  on  a  true  accounting  of 
the  investment,  the  division  of  the  surplus  will  bring  the  city 
a  large  revenue  and  still  leave  to  the  company  sufficient  incent¬ 
ive  to  do  its  best.  The  plan  at  least  tends  to  stability  of  in¬ 
vestment  values  and  helps  to  hold  speculation  and  frenzied 
finance  in  check.  It  should  be  distinguished  from  the  plan, 
sometimes  proposed,  of  taxing  a  company  on  its  net  receipts 
before  dividends  and  interest  are  paid. 

57.  The  right  to  purchase  reserved  to  the  city — It  is  a 
common  thing  to  reserve  in  a  franchise  grant  the  right  to 
purchase  the  property  of  the  grantee  either  at  the  expiration 
of  the  grant,  or  at  regular  periodic  intervals  or  at  the  dis¬ 
cretion  of  the  city.  A  considerable  part  of  the  monopoly 
profit  in  public  service  industries  is  prospective,  arising  from 
the  hope  of  better  things  to  come.  A  short-term  franchise 
tends  to  limit  the  value  of  this  hope,  but  unless  the  city  is  in 
a  position  to  buy  the  property  at  the  expiration  of  the  fran¬ 
chise  or  to  license  some  other  company  to  buy  it,  the  logic  of 


60 


MUNICIPAL  FRANCHISES. 


necessity  bolsters  up  the  company’s  hope  of  renewal  in  an 
extraordinary  way.  If  it  is  known  that  the  franchise  will  be 
absolutely  dead  and  valueless  when  it  expires,  and  the  com¬ 
pany’s  property  can  be  taken  away  from  it  at  a  fair  price  so 
as  to  permit  the  continuation  of  the  business  under  other  aus¬ 
pices  without  interruption,  the  monopoly  value  of  the  fran¬ 
chise  will  be  greatly  curtailed.  The  actual  profits  from  pres¬ 
ent  operation  will  be  no  less,  but  the  public  will  be  delivered 
from  the  much  heavier  burdens  of  capitalized  hope  mortgag¬ 
ing  the  future.  The  reservation  in  the  franchise  of  the  right 
to  purchase  the  property  of  the  grantee,  with  adequate  pro¬ 
visions  for  determining  the  price,  is  one  of  the  most  import¬ 
ant  guaranties  that  the  city  can  have.  With  the  exceptional 
opportunity  for  profit  that  goes  with  an  unregulated,  un¬ 
limited  monopoly  franchise  practically  removed  by  various 
devices,  including  the  right  to  purchase,  the  franchise  holder 
will  be  more  likely  to  engage  in  good  faith  in  the  manufacture 
of  gas,  the  production  of  electrical  energy,  the  furnishing  of 
transportation,  or  the  proper  management  of  whatever  the 
business  may  be  for  which  the  franchise  is  granted,  rather 
than  engage  primarily  in  the  manipulation  of  securities,  the 
robbery  of  stockholders  and  the  milking  of  the  public. 
Preferably  the  option  for  purchase  should  be  open  to  the  city 
to  exercise  at  any  time  after  reasonable  notice.  Provision 
may  properly  be  made  for  the  payment  of  a  considerable  bonus 
in  addition  to  either  present  value  or  investment  cost  in 
case  the  city  should  desire  to  take  over  the  property  within  a 
few  years  after  the  grant  is  made  and  before  the  investment 
has  been  given  a  chance  to  earn  a  reasonable  profit.  Some 
such  provision  as  this  would  be  necessary  in  the  case  of  public 
utility  extensions  into  comparatively  undeveloped  territory. 
Care  must  be  taken,  in  any  case,  to  lay  down  rules  that  will 
exclude  absolutely  from  the  reckoning  in  case  of  purchase  the 
value  of  the  franchise  which  the  city  has  given  away.  Some 
will  urge  that  “  good  will  ”  should  be  counted  in  as  an  asset  for 
which  the  company  should  be  paid.  The  happy  condition 
where  a  monopoly-holder  actually  enjoys  the  good  will  of 
his  patrons  is  not  likely  to  be  disturbed  for  the  sake  of 
municipal  purchase.  The  city  will  be  much  more  likely  to 
exercise  its  option  when  ill-will  stands  on  the  liability  side  of 
the  company’s  ledger  than  when  “  good  will  ”  stands  on  the 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  61 


asset  side.  The  trouble  is  that  a  private  monopoly,  having 
the  entire  business  safely  in  the  hollow  of  its  hand,  does  not 
need  any  “  good  will.”  The  people  have  to  patronize  it  any- 
way. 

The  phrase  “  as  a  going  concern  ”  is  sometimes  inserted  in 
the  section  of  the  franchise  describing  the  principles  upon 
which  the  valuation  of  the  property  is  to  be  fixed.  This  is  a 
dubious  phrase,  and  should  not  be  used  unless  it  is  carefully 
defined.  If  it  means  simply  that  the  plant  and  fixtures 
must  be  valued  as  being  already  in  place  and  ready  for  use,  it 
is  all  right.  If  it  means,  however,  that  the  property  is  to  be 
valued  according  to  the  net  profits  earned  by  it  while  being 
operated  under  the  franchise,  then  it  will  include  the  market 
value  of  the  franchise  itself  minus  that  portion  of  this  value 
arising  from  the  hope  of  greater  returns  in  the  future. 
Great  care  should  be  taken  to  have  the  purchase  clause 
absolutely  clear  and  straightforward,  as  it  is  the  most  import¬ 
ant  means  of  accomplishing  two  purposes,  namely,  the  limita¬ 
tion  of  monopoly  profits  and  the  maintenance  by  the  city  of 
control  over  the  streets.  An  excellent  illustration  of  the  way 
not  to  provide  for  possible  purchase  by  the  municipality  is 
found  in  the  Nashville  street  railway  settlement  of  half  a 
dozen  years  ago,  according  to  which  the  city  was  authorized, 
at  any  time  after  twenty  years,  to  buy  out  the  companies  by 
“  paying  that  sum  of  money  which,  if  invested  at  the  same 
rate  of  interest  that  would  be  realized  by  an  investment  in 
the  open  market  ....  in  bonds  of  the  city  of  Nashville 
then  having  twenty  years  to  run,  would  yield  a  yearly  income 
equal  in  amount  to  50%  of  the  gross  receipts”  of  the  com¬ 
panies  for  the  preceding  twelve  months.1  Facts  and  figures 
furnished  by  the  Massachusetts  State  Board  of  Railroad  Com¬ 
missioners  enable  us  to  see  how  such  a  scheme  would  work 
in  that  state.  If  we  count  the  actual  rate  of  interest  paid  on 
money  invested  in  bonds  of  the  City  of  Springfield  as  3.7%,  it 
would  require  $16,500,000  of  bonds  to  earn  $612,000,  which 
is  50%  of  the  Springfield  Street  Railway  Company’s  gross 
earnings  from  operation  in  the  year  ending  Sept.  30,  1906. 
That  would  be  the  price  the  city  would  have  to  pay  according 
to  the  Nashville  scheme  if  it  desired  to  take  over  the  street 
railways,  whereas  the  total  permanent  investment  of  the 

1  Laws  of  Nashville,  1908,  p.  907. 


62 


MUNICIPAL,  FRANCHISES. 


Springfield  company  as  set  forth  in  its  own  report  for  the 
same  year  was  only  $3,860,000.  There  is  not  much  curtail¬ 
ment  of  monopoly  profits  in  a  reserved  right  to  purchase 
the  property  for  more  than  four  times  what  it  cost. 

Another  feature  of  the  purchase  clause  to  which  special 
attention  should  be  given  is  the  method  of  naming  the 
appraisers  or  arbitrators.  Sometimes  the  city  is  to  appoint 
one,  the  company  one,  and  these  two  a  third.  But  if  the  two 
first  appointed  cannot  agree,  then  what?  It  may  be  that  on 
the  application  of  either  of  the  principal  parties  in  interest, 
any  judge  of  the  Circuit  Court  or  the  Superior  or  the  Supreme 
Court,  as  the  case  may  be,  is  authorized  to  appoint  the  third 
arbitrator.  Such  a  plan  would  leave  it  open  for  the  company 
to  instruct  its  representative  not  to  agree,  and  in  consequence 
of  such  disagreement  be  enabled  to  get  some  favorite  judge 
out  of  his  bed  at  midnight  to  appoint  a  friendly  third 
appraiser,  who  with  the  company’s  own  representative  could 
render  a  majority  report  and  bind  the  city  to  the  valuation 
fixed  by  them.  If  the  third  appraiser  is  to  be  appointed 
by  a  court,  notice  and  a  hearing  should  be  required,  and  if 
there  are  more  judges  than  one  in  the  court,  then  appoint¬ 
ment  should  be  made  by  majority  of  the  judges.  A  peculiar 
trick  appears  in  an  electric  light  franchise  granted  by  the 
town  of  Flushing  in  1897  just  before  its  annexation  to  New 
York  City.  In  this  case  the  franchise  was  granted  for  a 
period  of  25  years  with  the  right  of  renewal  for  a  similar 
period  at  an  appraised  revaluation.  One  appraiser  was  to 
be  appointed  by  each  of  the  parties,  but  if  these  could  not 
agree  on  a  third,  the  company  was  authorized  to  name  the 
president  of  some  bank  or  trust  company,  who  in  turn  would 
have  authority  to  appoint  all  three  appraisers,  and  the  town 
bound  Greater  New  York  to  accept  the  decision  of  the 
majority  of  the  appraisers  who  might  be  appointed  in  this 
way.  It  would  only  be  necessary  for  the  company  to  select 
the  bank  president  whose  institution  had  guaranteed  the  com¬ 
pany’s  bonds. 

Another  trick  of  the  franchise-seeker  is  to  consent  to  the 
city’s  reservation  of  the  right  to  purchase,  but  to  fix  the  terms 
so  that  the  city  will  have  to  pay  the  full  value  of  the  property 
and  then  pay  the  outstanding  mortgages  on  it  too.  Look 
out  for  the  purchase  clause! 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  63 

58.  Reversion  of  the  property  to  the  city  at  the  expiration 
of  the  franchise — The  advocates  of  compensation  for  fran¬ 
chise  grants  have  in  some  cases  gone  so  far  as  to  urge  that 
the  property  of  the  franchise  holder  should  revert  to  the 
city  at  the  expiration  of  the  grant  without  compensation. 
This  plan,  if  practicable,  would  result  in  the  city’s  coming 
into  possession  of  fully-equipped  public  utility  plants,  free  of 
debt,  at  the  expiration  of  the  original  franchise  periods. 
Of  course,  this  would  not  be  possible  unless  the  plants  had 
been  expected  to  pay  for  themselves  out  of  earnings  in  the 
meantime.  This  scheme  is  in  some  respects  superior  to  the 
common  practice  of  granting  limited  franchises  without  mak¬ 
ing  any  provision  whatever  for  the  disposition  of  the  plant 
at  the  expiration  of  the  franchise.  There  are  two  objections 
urged  against  the  plan,  however.  One  is  that  the  company 
will  almost  inevitably  let  its  plant  and  property  run  down 
toward  the  close  of  the  franchise  period,  so  that  the  public 
will  suffer  from  bad  service  and  the  city  will  come  into  the 
possession  of  an  out-of-date  equipment,  needing  immediate 
and  complete  rehabilitation.  This  condition  runs  counter  to 
reason  and  good  public  policy  with  reference  to  public  utilities. 
In  the  second  place,  the  plan  of  paying  for  the  entire  plant  out 
of  earnings  within  a  comparatively  short  period  may  neces¬ 
sitate  higher  rates  than  are  consistent  with  public  welfare  and 
justice  to  the  present  generation.  This  objection  is  not  as 
strong  as  the  other  one,  for  experience  shows  that  the  neces¬ 
sities  of  urban  government  tend  to  increase  even  more  rapidly 
than  population.  While  it  may  seem  an  injustice  to  require 
this  generation  to  make  a  present  to  the  next  one  of  a  fully- 
equipped  gas  plant  or  street  railway  system,  nevertheless  it 
is  a  much  greater  injustice  for  this  generation  to  saddle  upon 
the  next  one  a  debt  for  a  public  utility  plant  that  has  been 
used  up  or  has  gone  out  of  date  or  is  so  inadequate  that  it  has 
to  be  rebuilt.  The  future  always  has  new  burdens  that  are 
not  foreseen,  and  it  may  not  be  amiss  to  adopt  the  principle 
of  paying  for  “  permanent  ”  public  improvements  in  each 
generation,  leaving  to  the  future  the  responsibility  for  the 
new  burdens  that  time  will  create.  Most  American  cities 
have  followed  the  same  profligate  policy  that  has  been  followed 
by  public  utility  corporations  in  this  country,  namely,  the 
policy  of  piling  up  obligations  and  duplicating  capitaliza- 


64 


MUNICIPAL  FRANCHISES. 


tion,  always  deferring  to  the  future  the  unpleasant  necessity 
of  paying  for  what  this  generation  uses.  While  for  the  first 
reason  given,  the  plan  of  requiring  the  company  to  turn  its 
property  over  to  the  city  free  of  charge  at  the  end  of  a  fixed 
period  is  not  a  good  one,  substantially  the  same  result  might 
be  accomplished  by  requiring  the  company  to  set  aside  each 
year  a  certain  percentage  of  its  gross  receipts  or  a  certain 
fixed  amount  to  create  a  sinking  fund  to  be  used  by  the  city 
in  buying  in  the  company’s  bonds  and  paying  its  stockholders 
the  net  appraised  value  of  the  plant  minus  the  amount  of  its 
debts. 

The  value  of  franchises  in  great  centers  of  population  is 
much  less  than  it  was  at  one  time  believed  to  be.  A  perpetual 
franchise  for  a  railway  in  the  streets  of  Manhattan  Island 
seemed  to  Wm.  C.  Whitney  and  his  fellow-dreamers  to  be  of 
practically  unlimited  value.  They  appeared  to  think  that  it 
could  not  be  overcapitalized.  The  extension  of  transfer 
privileges,  the  decrease  in  the  value  of  five  cents,  the  increase 
in  the  expense  of  construction  and  maintenance,  the  imposi¬ 
tion  of  franchise  taxes  by  the  state  and  many  other  changes 
have  burst  the  bubble.  Various  regulations  and  conditions 
may  reduce  the  value  of  a  franchise  to  nothing.  Neverthe¬ 
less,  it  would  not  be  unjust  to  require  a  franchise-holder  to 
devote  a  portion  of  his  earnings  to  paying  for  the  plant  for 
the  benefit  of  the  city,  even  though  such  a  requirement  should 
necessitate  somewhat  higher  rates  than  would  otherwise  be 
essential. 

59.  Profits  induced  by  creating  special  demands  for  service. — 

Thus  far  in  the  discussion  of  plans  for  limiting  the  monopoly 
profits  of  franchise-holders  we  have  had  in  view  primarily 
the  profits  derived  from  the  rendering  of  the  services  de¬ 
manded  by  the  necessities  of  the  community.  It  is  to  be 
expected  that  a  public  utility  corporation  will  use  means  to 
extend  its  business  by  inducing  people  to  ride  more  on  the 
street  cars,  to  burn  more  gas,  to  use  more  water  or  electricity, 
to  put  in  more  telephones,  as  the  case  may  be.  The  dif¬ 
ference,  as  compared  with  the  efforts  of  a  competitive  enter¬ 
prise  to  increase  its  business,  is  this,  that  a  public  utility 
company  having  a  monopoly  can  only  increase  its  patronage 
by  increasing  the  total  consumption  of  its  commodity  or 
service.  It  cannot  profit  by  outwitting  or  outserving  its 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  65 

rivals  and  getting  their  patrons  away  from  them:  for  it  has 
no  rivals.  It  is  perfectly  legitimate,  however,  for  a  public 
utility  company  to  strive  to  increase  the  total  demand  for  its 
service.  Its  advantage  lies  in  the  certainty  that  it  will  get 
the  entire  benefit  of  this  increase  no  matter  how  great  the 
increase  is.  This  great  advantage,  which  is  the  backbone  of 
the  monopoly,  leads  to  a  special  advantage  in  certain  cases. 
A  street  railway  company,  for  example,  may  establish  amuse¬ 
ment  parks  and  provide  popular  entertainments  at  points 
which  are  inaccessible  to  the  public  except  by  the  company’s 
car  lines.  A  company  may,  as  a  side  issue,  work  up  excur¬ 
sions,  expositions,  conventions,  civic  fetes,  etc.,  which  in  the 
nature  of  the  case  will  compel  the  people  who  take  part  in 
these  enterprises  to  ride  on  the  company’s  cars.  In  like 
manner  a  gas  company  may  induce  builders  to  instal  gas 
ranges  instead  of  coal  ranges  in  the  houses  they  construct  for 
sale  or  rent,  with  the  result  that  the  occupiers  will  be 
practically  compelled  to  use  the  company’s  gas  for  cooking. 
While  in  other  utilities  the  devices  for  fastening  necessity 
upon  the  public  may  not  be  so  obvious,  it  is  clear  that  any 
increase  in  the  demand  for  a  public  utility  resulting  from 
coercion  brought  about  by  conditions  which  the  franchise - 
company  had  a  hand  in  creating,  is  an  especially  obnoxious 
advantage  pertaining  to  monopoly.  Provisions  to  prevent  a 
company  from  reaping  this  advantage  are  especially  desirable. 
The  matter  cannot  easily  be  attacked  directly.  In  relation 
to  transportation  service,  it  may  be  required,  however,  either 
that  excursion  and  amusement  crowds  shall  be  handled  at 
lower  rates  or  that  seats  shall  be  provided  for  all  or  that  only 
those  who  get  seats  need  to  pay.  In  general,  this  difficulty 
can  best  be  met  through  regulation  of  rates  and  service,  so 
that  the  company  shall  not  be  permitted  to  take  unusual 
advantage  of  a  necessity  which  it  has  created. 

60.  Profits  from  auxiliary  enterprises — One  of  the  great¬ 
est  evils  of  the  transportation  business  as  conducted  in  the 
United  States  has  been  the  mixing  of  the  business  of  a  com¬ 
mon  carrier  with  that  of  a  mine  owner,  a  warehouse  or 
elevator  proprietor  or  a  timber  or  oil  producer.  Congress 
attempted  to  eliminate  this  evil  by  the  enactment  of  the 
“  Commodities  Clause  ”  of  the  Interstate  Commerce  Act, 
requiring  railroads  to  dispose  of  their  auxiliary  businesses. 


66 


MUNICIPAL  FRANCHISES. 


Public  utility  companies  operating  under  urban  franchises  do 
not  so  frequently  as  the  steam  railroads  attempt  to  increase 
their  monopoly  profits  by  controlling  auxiliary  enterprises 
through  which  profits  can  be  concealed  and  regulation  escaped. 
The  most  notable  exception  to  this  rule  is  in  the  case  of 
politics,  a  business  in  which  many  franchise  companies  invest 
large  sums  for  the  purposes  mentioned.  There  are  other  less 
important  exceptions.  In  New  York  City  the  building  of 
electrical  conduits  was  given  as  a  monopoly  to  two  companies 
many  years  ago.  While  these  companies  are  supposed  to  give 
space  to  all  accredited  applicants  on  equal  terms,  it  has  de¬ 
veloped  in  recent  years  that  the  majority  of  the  shares  of 
capital  stock  of  one  is  controlled  by  the  New  York  Telephone 
Company  and  of  the  other  by  the  New  York  Edison  Company, 
and  independent  companies  have  not  found  it  any  easier  to 
get  space  in  the  conduits  by  reason  of  this  condition  of  affairs. 
Reference  was  made  in  the  preceding  paragraph  to  the 
establishment  of  amusement  parks  by  street  railway  companies 
for  the  stimulation  of  traffic.  Fortunately  these  institutions 
are  not  usually  profitable  in  themselves.  Of  22  street  railway 
companies  in  Massachusetts  maintaining  amusement  parks  in 
1906,  nine  reported  no  receipts  at  all  from  this  source, 
ten  showed  an  excess  of  expenditures  over  receipts,  while 
three  showed  a  slight  balance  the  other  way.  For  the 
whole  twenty-two,  park  expenses  amounted  to  $181,000 
as  against  receipts  of  $101, 800.1  It  is  obvious  from 
this  record  that  no  special  restrictions  in  franchises  or  laws 
are  required  to  limit  the  direct  profit  from  the  operation  of 
these  transportation  sideshows.  Their  primary  purpose  is  to 
create  a  demand  for  street  car  rides.  While  it  might  not  be 
amiss  for  various  reasons  to  prevent  street  railway  companies 
from  operating  amusement  resorts,  the  problem  can  perhaps 
be  solved  by  the  city’s  furnishing  adequate  parks  and  amuse¬ 
ment  places  at  various  points  within  easy  reach  of  the  people 
without  the  help  of  the  street  cars.  Where  the  local  circum¬ 
stances  warrant  the  precaution,  it  is  desirable  to  insist  by 
franchise  conditions  or  otherwise  that  no  public  utility  com¬ 
pany  shall  invest  in  the  stock  of  an  auxiliary  concern  such 
as  an  electrical  conduit  company. 

1  Figures  compiled  from  returns  published  in  the  Fortieth  Annual  Report  of  the 
Massachusetts  Board  of  Railroad  Commissioners. 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  67 

61.  Profits  from  the  sale  of  accessories — Many  public 
utility  companies  furnish  house  fixtures  free.  But  the  gas 
consumers  usually  have  to  buy  lamps,  burners  and  stoves. 
The  gas  range  may  go  with  the  house.  Meters  are  furnished 
free  except  that  a  minimum  or  “  meter  ”  charge  is  often 
made  in  the  case  of  small  consumers.  Electric  lamps  are 
sometimes  sold  to  the  company’s  patrons  and  sometimes 
furnished  as  a  part  of  the  service.  We  do  not  know  of  any 
street  railway  company  that  charges  extra  for  straps,  but 
there  are  doubtless  many  riders  who  would  be  willing  to  pay 
for  them  at  the  rush  hours.  There  are  various  office  tele¬ 
phone  fixtures  which  may  or  may  not  be  furnished  with  the 
service  or  which  may  or  may  not  be  sold  by  the  telephone 
company  directly.  It  is  sufficient  to  say  that  although  under 
competitive  conditions  and  while  the  use  of  the  service  is 
being  stimulated,  public  utility  companies  are  likely  to  follow 
a  liberal  policy  in  regard  to  fixtures  and  accessories,  a  gas 
pressure  regulator  furnished  by  parties  not  connected  with  the 
gas  company  should  “  run  and  hide 99  when  the  company’s 
meter  reader  or  repair  man  finds  his  way  into  the  consumer’s 
cellar.  A  company  having  general  charge  of  the  installation 
and  maintenance  of  its  services  has  many  opportunities  to 
“  knock 99  the  accessories  furnished  by  somebody  else.  It  is 
not  easy  to  devise  a  franchise  provision  that  would  effectually 
limit  the  opportunity  of  a  franchise  company  for  brigandage 
of  this  kind.  It  might  possibly  be  worth  while  to  provide 
that  the  company  shall  not  sell  or  rent  any  fixtures  whatever, 
but  shall  furnish  a  certain  minimum  as  a  part  of  the  service, 
leaving  the  consumer  to  buy  all  extras  from  independent 
sources.  It  is  probably  sufficient,  however,  if  the  consumer 
is  guaranteed  the  right  to  attach  fixtures  purchased  in  the 
open  market  to  any  public  utility  service. 

62.  Profits  from  the  sale  of  by-products. — Incidental  to 
the  manufacture  of  gas,  large  quantities  of  coke,  coal  tar  and 
ammonia  are  produced.  Electric  light  and  power  companies 
frequently  have  a  certain  amount  of  exhaust  steam  which  can 
be  sold  for  heating  purposes.  Street  railways  have  advertis¬ 
ing  space  for  sale  and  sometimes  carry  the  mails  and  do  a 
little  express  and  freight  business  incidental  to  passenger 
service.  These  companies  also  furnish  observation  cars, 
funeral  cars,  and  other  special  cars  to  meet  particular  needs 


68 


MUNICIPAL  FRANCHISES. 


outside  of  the  ordinary  traffic.  All  these  things  may  be 
termed  the  by-products  of  public  utilities.  The  profit  gained 
from  these  sources  is  in  addition  to  the  monopoly  profit 
derived  directly  from  ordinary  operations  under  the  fran¬ 
chise.  The  Boston  Elevated  Railway  Company  got  $98,000 
from  advertising  in  cars  and  stations  in  1906,  or  about  three- 
fourths  of  one  per  cent  of  its  total  income.1  In  1907  the 
gas  companies  of  Massachusetts  got  nearly  $600,000,  or  about 
six  per  cent  of  their  total  income,  from  residuals — coke,  tar 
and  ammoniacal  liquor.2  In  the  same  year  the  electric  light 
companies  of  Massachusetts  received  $37,600  for  steam  heat¬ 
ing,  or  somewhat  less  than  four  tenths  of  one  per  cent  of 
their  total  income.3  While  these  are  comparatively  small 
sums,  they  are  not  too  small  to  attract  the  attention  of  the 
companies,  and  unless  care  is  exercised  in  drafting  the  gross 
receipts  clause  of  a  franchise,  it  will  be  found  that  the  tax 
to  be  paid  to  the  city  does  not  include  a  percentage  of  these 
miscellaneous  receipts.  In  view  of  the  extra  burden  on  the 
streets  arising  from  the  operation  of  mail  cars  and  other 
special  cars — ordinary  freight  cars  are  used  in  Brooklyn — it 
might  be  reasonable  to  impose  a  special  license  tax  on  them. 
A  similar  excise  could  properly  be  placed  on  street  car  advertis¬ 
ing.  As  for  coke  sold  for  fuel  by  the  gas  companies,  it  comes 
into  competition  with  other  fuels  and  cannot  be  said  to  yield 
a  monopoly  profit,  though  in  many  cities  practically  the 
entire  supply  of  coke  on  the  local  market  is  manufactured 
by  the  single  gas  company  that  operates  there.  In  regard 
to  steam  heating  furnished  by  the  electric  companies,  the  case 
is  different,  as  its  distribution  requires  a  special  franchise. 
Steam  heating  is  a  public  utility  by  itself,  although  by  no 
means  so  well-developed  or  so  generally  supplied  as  the  more 
important  utilities  we  are  discussing.  While  there  may  be  a 
decided  advantage  to  the  public  as  well  as  to  the  electric  com¬ 
pany  in  giving  the  latter  a  limited  franchise  for  marketing 
its  surplus  steam,  care  should  be  taken  not  to  allow  the 
company  to  preempt  the  field  without  imposing  upon  it  the 
obligation  to  supply  the  service  to  the  full  extent  of  the 

*  See  Twenty-Eighth  Annual  Report  of  the  Massachusetts  Board  of  Railroad 

Commissioners,  p.  214. 

1  See  Twenty-Third  Annual  Report  of  Board  of  Gas  and  Electric  Light  Commis¬ 
sioners,  Massachusetts,  p.  102. 

•  Ibid,  p.  149. 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  69 

public  demand.  In  handling  the  problem  of  by-products  in  a 
franchise,  care  should  be  taken  that  at  least  everything  in  any 
way  connected  with  operation  in  the  streets  should  be  brought 
under  the  gross  receipts  tax,  if  there  is  one.  The  receipts 
from  by-products  such  as  advertising  space,  which  cost  the 
company  practically  nothing,  may  well  be  subjected  to  a 
heavy  special  tax.  It  would  not  be  unjust,  indeed,  to  require 
the  company  to  pay  over  to  the  city  one-half  of  its  receipts 
from  such  sources.  There  is  no  particular  reason  for  taxing 
the  sale  of  such  by-products  as  coke  and  tar,  which  have  no 
direct  relation  to  the  exercise  of  the  franchise  either  in 
manufacture  or  in  distribution.  Special  cars  operated  by 
street  railway  companies,  if  their  use  adds  a  special  burden 
to  the  street  and  involves  special  inconvenience  and  danger 
obnoxious  to  the  public  should  be  taxed  heavily  enough  to 
discourage  their  use  or  to  compensate  for  the  damage 
they  do. 

63-  Profits  from  the  sale  of  incidental  privileges  and 
surplus  services — A  steam  railroad  company  having  access  to 
the  heart  of  a  great  city  may  be  in  a  position  to  charge 
enormous  rentals  to  another  company  desiring  to  use  its 
tracks,  or  indeed  may  shut  such  a  company  out  altogether. 
A  street  railway  company  occupying  the  main  streets  in  the 
heart  of  a  city  or  a  strategic  point  at  the  entrance  to  it, 
may  keep  rival  companies  out  entirely  or  may  exact  from 
interurban  electric  lines  exorbitant  tribute  for  terminal  priv¬ 
ileges  which,  in  the  public  interest,  the  interurban  companies 
should  have  at  a  fair  rental.  In  like  manner  a  local  tele¬ 
phone  company  may  refuse  the  use  of  its  poles  to  a  long 
distance  telephone  company  or  may  force  the  latter  to  pay 
an  unreasonable  price  for  connecting  its  through  lines  with 
the  local  exchange.  An  electric  power  company,  having  im¬ 
pounded  the  water  power  of  a  whole  region,  may  practice  ex¬ 
tortion  when  it  comes  to  sharing  its  privileges  with  cities  or 
companies  engaged  in  the  distribution  of  electric  light.  A 
gas  company  having  an  enormous  plant  capable  of  producing 
more  gas  than  its  own  patrons  demand  may  refuse  to  sell  its 
surplus  to  smaller  companies  operating  under  more  difficult 
conditions,  or  may  charge  them  too  much  for  it.  In  such 
cases  as  these  the  monopoly  given  by  a  franchise  may  prove 
most  damaging  to  the  public  interests  and  most  profitable  to 


70 


MUNICIPAL  FRANCHISES. 


the  franchise  holder  even  though  the  rates  to  the  public  are 
not  exorbitant  and  the  service  rendered  is  not  inferior.  It 
is  extremely  important  that  in  franchises  and  legislation 
precautions  should  be  taken  to  protect  the  public  interests  at 
this  point.  The  public  authorities  should  always  retain  the 
right  to  compel  a  company  holding  a  railroad  or  street  rail¬ 
way  franchise  to  permit  other  companies  to  use  its  tracks 
upon  payment  of  reasonable  rental.  No  telephone  company 
should  be  in  a  position  arbitrarily  to  refuse  local  connections 
with  a  long  distance  service  or  vice  versa.  Water  rights 
obtained  for  the  manufacture  of  electrical  energy  should 
not  be  held  by  one  company  except  subject  to  the  right  of 
other  companies  to  share  in  their  use,  so  long  as  there  is  a 
surplus,  on  payment  of  a  fair  proportion  of  the  cost  of 
development. 

Electric  light  and  power  companies  may  often  be  operated 
with  economy  in  connection  with  water  supply  works  and 
electric  railways.  An  electric  light  plant  is  compelled  to 
maintain  generating  machinery  of  capacity  sufficient  to  meet 
the  maximum  demand  less  a  certain  allowance  for  storage. 
This  means  that  during  the  greater  part  of  the  twenty-four 
hours  the  machinery  is  idle,  although  it  could  be  used  to 
advantage  to  develop  energy  to  operate  the  pumps  of  the 
water  works  or  to  furnish  current  for  street  railways  and 
other  power  users.  The  electric  light  franchise  should  re¬ 
serve  to  the  city  the  right  to  compel  the  company  to  furnish 
at  reasonable  rates  to  the  water  works,  the  street  railways  or 
other  public  enterprises  this  surplus  power.  In  other  words, 
the  city  should  remain  the  master  of  the  general  public 
utility  situation  with  power  to  correlate  the  various  interests 
and  compel  them  to  work  together  for  the  public  benefit  by 
such  interchanges  of  service  as  may  be  necessary  to  bring 
about  possible  economies  and  lower  the  costs  of  all  the 
utilities  to  the  public. 

64.  Profits  from  the  exploitation  of  real  estate. — It  is 

quite  possible  for  public  utility  magnates  operating  under 
liberal  franchises  and  having  knowledge  of  the  future  plans 
of  their  companies  to  invest  in  real  estate  in  advance  of 
extensions  and  reap  for  themselves  individually  or  for  the 
companies  large  harvests  by  using  the  franchise  privileges  to 
further  private  ends.  This  is  especially  true  in  the  case  of 


MONOPOLY  PROFITS,  AND  WAYS  OF  LIMITING  THEM.  71 

utilities  which  have  the  right  to  make  extensions  but  are 
under  no  obligations  to  do  so.  The  most  striking  oppor¬ 
tunities  are  connected  with  the  extension  of  street  railway 
and  rapid  transit  lines,  but  fortunately  in  these  enterprises 
the  obligation  to  build  within  a  certain  limited  time  usually 
goes  with  the  right  to  build,  the  right  being  forfeited  if  the 
obligation  remains  unfulfilled.  Even  where  this  is  the  case, 
however,  real  estate  in  the  vicinity  of  a  proposed  extension 
can  be  boomed  by  the  promise  of  the  company  to  build.  After 
the  insiders  have  unloaded  their  landed  holdings  at  a  big 
profit,  the  plans  for  construction  may  be  abandoned  or 
changed.  The  power  unjustly  to  increase  monopoly  profits 
in  this  way  is  so  obvious  unless  special  provision  is  made 
against  it,  that  we  need  only  concern  ourselves  with  finding 
an  adequate  means  to  curtail  it.  The  best  means,  clearly,  is 
the  stipulation  in  the  franchise  that  the  company  shall  extend 
its  lines  whenever  public  necessity  or  convenience  as  deter¬ 
mined  in  definitely  prescribed  ways  demands  it.  Another 
means  for  preventing  the  company  and  its  officers  from  using 
the  franchise  to  bolster  up  their  real  estate  deals  is  to  forbid 
the  company  itself  or  any  of  its  officers  to  hold  real  estate 
in  the  vicinity  of  its  unconstructed  franchise  routes,  except 
so  much  as  is  necessary  for  the  conduct  of  the  company’s 
business.  This  prohibition  could  hardly  be  extended  to  stock¬ 
holders  and  directors,  who  are  only  secondarily  engaged  in 
business  under  the  franchise,  and  whose  manifold  other  inter¬ 
ests  might  necessitate  the  holding  of  real  estate  for  various 
purposes,  and  render  difficult  to  prove  the  diversion  of  their 
franchise  powers  to  the  special  benefiting  of  their  own  prop¬ 
erty.  Some  people  may  think  that  in  attempting  to  regulate 
the  buying  and  selling  of  land  by  public  service  corporations 
and  their  officers,  we  are  going  altogether  too  far  toward 
interference  with  private  affairs.  The  answer  is  that  there 
is  nothing  more  vital  to  the  general  welfare  of  a  community 
than  the  manner  in  which  public  franchises  are  exercised. 
It  should  be  our  aim  to  eliminate  favoritism  absolutely  to  the 
last  detail,  so  that  an  honest  franchise  holder  will  exercise  his 
extraordinary  privileges  with  the  same  circumspection  that  is 
characteristic  of  an  honest  public  official.  A  franchise  should 
not  in  the  remotest  way  carry  with  it  a  special  privilege  for 
exploitation.  In  street  railway  and  rapid  transit  franchises, 


TZ 


MUNICIPAL  FRANCHISES. 


when  specific  streets  are  named,  there  should  be  no  exception 
to  the  rule  that  the  road  must  be  built  within  a  definite  period 
or  the  franchise  be  absolutely  forfeited.  An  intolerable  situa¬ 
tion  has  arisen  in  many  cities  where  franchises  have  been 
held  many  years  unused,  and  where  there  is  no  clearly  defined 
self-executing  forfeiture  clause  in  either  franchise  or  statute. 
Under  such  conditions,  it  may  require  years  of  litigation  to 
determine  whether  a  franchise  is  dead  or  alive.  Such  a 
situation  is  the  result  of  well-nigh  criminal  negligence  on  the 
part  of  public  authorities  in  the  past. 


CHAPTER  IV. 

INJURIES  TO  INDIVIDUALS,  AND  WAYS  OF  PREVENT¬ 
ING  THEM. 

65.  Injuries  to  persons  and  property  74.  Standard  quality  of  service  required. 

made  possible  by  possession  of  75.  Safety  regulations  made  and  appli- 
special  privileges.  ances  required. 

66.  Property  owners’ consents.  76.  Requiring  underground  construc- 

67.  Requirements  of  public  approval  for  tion. 

locations  of  works.  77.  Special  training  of  employees  re- 

68.  Civil  damages.  quired. 

69.  Special  service  for  discommoded  78.  Easy  identification  of  responsible 

patrons.  company  required. 

70.  Elimination  of  noise,  dust,  noxious  79.  Interference  with  other  users  of  the 

odors  and  other  nuisances.  streets. 

71.  The  furnishing  of  service  made  com-  80.  Limitation  of  obligations  that  may 

pulsory.  ~  '  be  imposed  upon  consumers. 

72.  Discrimination  in  rates  forbidden.  81.  Tribunal  for  hearing  complaints. 

73.  Inspection  of  meters  and  records  of 

use. 

65.  Injuries  to  persons  and  property  made  possible  by 
the  possession  of  special  priviledge — In  the  preceding  chap¬ 
ter  we  have  considered  those  elements  of  monopoly  which  give 
the  holder  of  a  franchise  a  special  advantage  over  his  fellow- 
men  in  the  matter  of  making  profit  out  of  his  business,  and 
have  discussed  various  provisions  of  franchise  contract  or 
regulatory  act  tending  to  curtail  or  take  away  this  advantage. 
We  have  now  to  consider  certain  other  incidents  of  public 
utility  monopoly  that  demand  careful  attention  in  the  draft¬ 
ing  of  franchises  and  public  utility  legislation.  Partly  on 
account  of  the  nature  of  the  business  and  partly  because  of 
the  absence  of  competition,  a  public  utility  company  is  placed 
in  a  position  where  it  can  inflict  serious  injuries  on  the 
person  or  the  property  of  an  individual,  without  his  being 
able  to  escape  by  his  own  unaided  efforts.  For  example,  in 
a  city  where  well  water  is  not  obtainable  or  where  wells  have 
been  closed  for  sanitary  reasons,  the  citizen  is  compelled  to 
take  water  from  the  public  water  works,  or  from  the  water 
company  if  the  supply  is  under  private  control.  Through 
the  carelessness  of  the  company  the  citizens  may  drink  down 
the  germs  of  typhoid  fever  and  bring  disease  and  death  into 
their  homes.  While  it  is  true  that  every  householder  could 

73 


MUNICIPAL  FRANCHISES. 


74 

boil  his  drinking  water  and  thus  avoid  the  risk  of  contracting 
this  disease,  it  is  unreasonable  to  expect  the  average  citizen 
to  incur  the  expense,  trouble  and  discomfort  of  first  boiling 
and  then  cooling  again  every  drop  of  water  that  he  drinks. 
Unless  he  does  so,  however,  or  unless  certain  precautions  are 
taken  in  franchise  or  statute  to  insure  purity  in  the  water 
supply,  he  may  suffer  irreparable  loss.  The  citizen  cannot 
escape  the  danger  by  transferring  his  trade  to  another  com¬ 
pany  offering  better  guarantees  of  the  wholesomeness  of  the 
commodity;  for  there  is  no  other  company.  Or  we  may 
take  an  illustration  from  the  telephone  business.  A  sub¬ 
scriber  may  depend  upon  his  telephone  connections  for  the 
opportunity  to  close  up  an  important  financial  transaction  at 
a  definite  time.  If  just  at  that  time  his  telephone  service 
fails  or  the  secrecy  of  his  telephone  conversations  is  not  pro¬ 
tected,  he  may  receive  great  financial  injury.  Complaints 
of  poor  service  are  likely  to  be  disregarded  as  long  as  it  is 
known  that  the  subscriber  must  continue  to  patronize  this 
particular  company  no  matter  whether  the  service  is  good  or 
bad.  In  the  gas  or  electric  light  and  power  business,  one 
man  may  have  his  chance  for  profit  wiped  out  by  discrimina¬ 
tion  in  rates.  Another  may  have  his  office  or  house  rendered 
unsanitary  by  gas  leakage.  Or  a  property  owner’s  fine  shade 
trees  may  be  cut  down  or  mutilated  to  make  room  for  electric 
light,  telegraph  or  other  wires.  The  electric  company  may 
be  careless  and  leave  its  wires  in  a  dangerous  condition  by 
reason  of  improper  insulation.  The  street  cars  may  strike  a 
man  down  in  the  street  or  make  such  a  racket  in  front  of  his 
house  that  he  cannot  sleep  or  even  converse  with  his  family 
or  friends  while  the  cars  are  going  by.  In  a  hundred  ways 
the  private  citizen  is  at  the  mercy  of  the  public  service  cor¬ 
porations.  He  is  shut  out  from  his  natural  remedy.  He 
would  like  to  <tf  quit  ”  the  company,  but  he  cannot.  Indeed, 
he  may  suffer  great  danger  from  the  company’s  operations 
even  if  he  does  not  patronize  it  at  all. 

66.  Property  owners’  consents — One  way  of  protecting 
the  citizen  against  undue  injury  to  his  property  by  franchise 
holders,  is  to  require  that  a  street  railway  shall  not  be  con¬ 
structed  or  electric  light  or  telephone  poles  erected  in  front 
of  his  property  without  his  consent.  In  the  case  of  street 
railways,  it  would  be  quite  unusual  to  call  for  the  consent  of 


INJURIES  TO  INDIVIDUALS. 


75 

every  property  owner  along  the  proposed  route,  but  the  consents 
of  the  owners  of  the  major  part  of  the  property  on  the  street, 
measured  either  by  frontage  or  by  assessed  valuation,  may  be 
required.  Furthermore  it  may  be  required  that  the  consents 
shall  be  secured  anew  for  every  change  in  motive  power,  or 
even  for  the  renewal  of  the  franchise  or  its  transfer  to  another 
company.  The  consent  provision  enables  each  property  owner 
to  dicker  with  the  company  for  compensation  for  injury  to  his 
land.  He  may  even  try  to  force  special  concessions  in  regard  to 
service.  It  is  said  that  in  Cleveland,  during  “  consent  wars  ” 
between  rival  companies,  property  owners  have  been  paid  $2, 
$3  or  $4  per  foot  of  frontage  for  consents.  Indeed,  sometimes 
they  have  been  paid  by  one  company  to  cancel  their  consents  to 
another  company.  At  City  Island,  New  York,  where  for  more 
than  twenty  years  two  street  railway  companies  have  main¬ 
tained  themselves  for  the  joint  operation  of  a  horse  car  line 
about  three  miles  in  length,  the  last  extension  of  the  road  was 
consented  to  by  a  cautious  property  owner  on  the  express  con¬ 
dition  that  the  time  required  to  go  from  a  point  in  front  of  his 
residence  to  Bartow  Station  at  the  other  end  of  the  line  should 
not  exceed  27  minutes.  While  it  is  not  usual  for  the  property 
owner  to  have  the  right  to  refuse  absolutely  to  permit  the 
erection  of  poles  in  front  of  his  property,  it  is  not  uncommon 
for  him  to  have  authority  to  designate  their  location,  or  at 
least  to  prevent  them  from  being  placed  where  they  will 
inflict  special  injury  upon  him.  The  consent  of  abutting 
property  owners  is  seldom,  if  ever,  required  for  the  laying 
of  gas  mains,  water  pipes  or  electrical  conduits  in  the  streets. 
While  there  is  an  element  of  justice  in  the  theory  of  property 
owners’  consents,  yet  on  the  whole  the  plan  is  a  bad  one. 
Public  utilities  should  be  extended  and  operated  primarily 
with  reference  to  the  general  interests  of  the  community. 
While  it  would  be  just  to  assess  property  owners  for  benefits 
conferred  and  to  compensate  them  for  damages  inflicted  by 
reason  of  the  construction  of  public  utility  fixtures  in  the 
streets  adjacent  to  their  property,  it  is  not  in  accordance  with 
good  public  policy  to  permit  individuals  to  veto  the  extension 
of  railways  and  pole  lines.  If  property  owners’  consents  are 
required  at  all,  an  alternative  should  be  left  open  to  the 
franchise  holder,  if  he  fails  to  get  the  necessary  number,  to 
appeal  to  some  judicial  tribunal,  as  is  done  in  New  York,  for 


76 


MUNICIPAL  FRANCHISES. 


permission  to  occupy  the  streets  with  his  fixtures.  The  con¬ 
sent  law  of  Ohio  has  been  a  desperate  failure  and  has  tended 
to  intrench  existing  companies  in  defiance  of  the  public  will. 

67.  Kequirement  of  public  approval  for  location  of  works. — 
Injuries  to  individuals  may  result  not  only  from  the  opera¬ 
tions  of  a  franchise  company  in  the  streets  but  also  from  the 
proximity  of  its  central  plant.  The  presence  of  a  gas-works 
in  a  residence  neighborhood  is  particularly  obnoxious  and 
generally  results  in  a  great  slump  in  land  values.  While 
it  might  be  difficult  to  prove  that  the  odors  emanating  from  a 
gas-holder  have  a  directly  injurious  effect  upon  the  morals  of 
the  individuals  who  inhale  them,  there  can  be  little  doubt 
that  the  presence  of  a  gas-holder  results  in  the  deterioration 
of  a  neighborhood.  There  is  something  so  offensive  about 
such  an  institution  that  naturally  its  immediate  environs  are 
depopulated  of  clean,  wholesome,  self-respecting,  law-abiding 
people,  and  the  flotsam  and  jetsam  of  civilization  gravitate 
toward  the  place.  This  tendency  is  illustrated  by  the  “  Gas 
House”  district  in  Hew  York  which  is  Charles  F.  Murphy’s 
own  bailiwick.  Here  even  under  the  unusually  favorable  con¬ 
ditions  that  prevailed  in  1908,  it  was  publicly  reported  that 
an  election  officer  who  protested  against  a  repeater’s  vote  was 
slugged  in  the  presence  of  many  witnesses,  was  sent  to  the 
hospital  as  a  victim  of  “  alcoholism  ”  and  died  a  few  days  later 
from  a  fractured  skull.1  The  people  who  knew  about  the 
affair  were  reputed  to  be  so  terrorized  by  the  “  Gas  House  ” 
district  gangs  that  they  were  unwilling  to  give  evidence 
against  the  criminal.  It  is  safe  to  say  that  the  neighborhood 
of  a  gas-house  is  not  a  good  place  in  which  to  live.  A  gas 
franchise  should  require  that  the  location  of  the  gas-works 
be  subject  to  the  approval  of  the  public  authorities.  It  might 
be  required  specifically  that  the  works  should  not  be  placed  in 
a  residence  district  or  that  the  company  should  maintain  open 
land  around  its  plant  to  keep  its  nuisance  on  its  own  premises. 
The  location  of  the  car  barns  and  storage  yards  of  an  electric 
railway  company  should  also  be  subject  to  the  approval  of  the 
public  authorities.  While  a  car  barn  is  not  generally  as  offen¬ 
sive  as  a  gas  plant,  the  screeching  of  the  cars  as  they  retire 
at  all  times  of  night  and  come  out  at  all  times  in  the  morn¬ 
ing  is  likely  to  disturb  the  sleep  of  the  neighborhood. 

1  New  York  Times,  Nov.  12, 1908  ;  New  York  Evening  Post,  Nov.  12, 1908. 


INJURIES  TO  INDIVIDUALS. 


77 


68.  Civil  damages. — While  it  is  true  that  anyone  suffering 
a  direct  injury  at  the  hands  of  a  public  service  corporation 
may  sue  it  for  damages,  as  he  could  sue  any  other  corporation 
or  person,  the  fact  that  the  company  is  operating  under  a 
public  franchise  and  performing  a  public  function  may  under 
certain  circumstances  alter  the  status  of  his  case.  It  is, 
therefore,  desirable  that  the  extent  of  the  company’s  liability 
for  various  classes  of  injury  should  be  fixed  by  its  franchise 
or  by  general  law.  Companies  are  often  required  to  give 
bond  to  save  the  city  harmless  from  damage  suits  resulting 
from  the  company’s  negligence.  Such  a  provision  is  neces¬ 
sary  because  of  the  close  relation  between  the  operations  of 
the  company  and  the  functions  of  government  performed 
directly  by  the  city,  especially  in  matters  pertaining  to  the 
care  of  the  streets.  While  the  detailed  regulation  of  the 
responsibility  of  public  service  corporations  may  be  left  to 
general  legislation,  the  franchise  itself  may  properly  con¬ 
tain  clauses  fixing  penalties  upon  the  company  for  failure  to 
fulfill  its  obligations  to  individuals.  Failure  to  give  transfers 
or  other  privileges  to  which  all  patrons  of  a  street  railway  are 
entitled,  wanton  destruction  or  injury  of  trees  in  the  street  in 
front  of  property,  interruption  of  service,  injury  to  abutting 
property  by  the  maintenance  of  a  nuisance  in  the  street,  or 
the  obstruction  of  free  passage  from  the  street  to  such  prop¬ 
erty, —  any  or  all  of  these  and  many  other  unjust  things  fre¬ 
quently  done  by  public  service  companies  may  be  made  the 
subject  of  special  franchise  provisions  that  will  make  the 
bringing  of  civil  suits  by  the  injured  parties  more  worth 
while.  It  would  hardly  be  practicable,  however,  to  fix  in  a 
franchise  a  scale  of  damages  for  personal  injuries  or  general 
damages  to  abutting  property  by  reason  of  the  maintenance 
of  the  utility  in  the  street.  The  amount  of  such  damages  can 
better  be  fixed  by  courts  and  juries  following  the  usual  pro¬ 
cesses  of  civil  suits. 

69.  Special  service  for  discommoded  patrons _ When  a 

street  railway  company  establishes  an  amusement  resort  of  its 
own  at  the  terminus  of  a  regular  line  of  car  service  or  when 
it  merely  connects  its  lines  with  parks  or  suburban  resorts 
owned  by  private  parties  or  by  the  city,  the  regular  patrons 
of  the  cars  are  likely  to  suffer  great  inconvenience.  The 
cars  may  all  be  crowded  with  through  passengers  when  they 


78 


MUNICIPAL  FRANCHISES. 


reach  the  points  where  the  local  passengers  get  on.  A  person 
selecting  his  residence  for  convenience  to  car  service  may 
suddenly  find  that  by  the  establishment  of  a  new  resort,  he 
has  been  crowded  out  of  his  accustomed  seat.  A  franchise 
might  well  provide  that  in  such  cases,  in  addition  to  the 
through  cars  for  accommodating  the  crowds,  the  company 
should  maintain  a  local  service  especially  for  its  local  patrons. 
In  the  case  of  a  gas  company,  it  is  necessary  to  maintain  a 
higher  pressure  at  the  center  of  distribution  in  order  that 
there  may  be  adequate  pressure  in  the  more  distant  mains. 
The  natural  result  is  that  consumers  living  in  the  vicinity 
of  the  holders  are  likely  to  have  their  gas  pushed  through 
the  burners  at  so  high  a  rate  as  to  prevent  complete  com¬ 
bustion  and  thereby  diminish  the  quantity  of  light  furnished 
while  at  the  same  time  the  amount  of  gas  consumed  is 
largely  increased.  Provision  should  be  made  in  the  franchise 
requiring  the  gas  company  to  install  and  maintain  pressure 
regulators  for  the  benefit  of  the  consumers  so  unfortunately 
situated.  In  general,  it  may  be  said  that  wherever  the 
regular  service  to  the  ordinary  patron  of  a  public  utility  is 
rendered  especially  unsatisfactory  by  unusual  conditions  over 
which  he  has  no  control  and  which  result  in  advantage  to 
other  consumers  or  in  profit  to  the  company,  special  service 
should  be  provided  for  him,  if  possible. 

70.  Elimination  of  noise,  dust,  noxious  odors,  and  other 
nuisances. — -While  the  authority  of  the  Legislature  or  the 
Common  Council  to  regulate  the  service  rendered  by  a  fran¬ 
chise  holding  company  under  the  police  power  is,  in  theory, 
ample  to  provide  for  the  abatement  of  the  nuisances  of  noise, 
dust,  disagreeable  odors,  etc.,  it  is  well  enough  to  cover  these 
matters  in  the  franchise  itself.  If  that  is  done  and  the  com¬ 
pany  accepts  the  franchise,  there  will  be  less  likelihood  of 
prolonged  litigation  in  the  Federal  courts  over  attempted 
regulation  that  is  displeasing  to  the  company.  The  noise 
nuisance  is  one  of  the  outrages  of  inefficient  street  car  service. 
It  can  be  prevented,  or  at  least  the  noise  can  be  greatly 
lessened,  by  requiring  heavy  rails  laid  upon  a  solid  road-bed 
and  specially  supported  and  tied  at  the  joints.  On  street  car 
lines  the  continual  thumping  caused  by  cars  falling  from  one 
rail  on  to  the  next  can  be  heard  for  many  blocks.  When  a 
heavy  interurban  car  comes  pounding  down  a  fine  residence 


INJURIES  TO  INDIVIDUALS. 


79 


street  at  two  o’clock  in  the  morning,  it  has  an  unwholesome 
effect  upon  citizenship.  Street  railway  road-bed  and  track 
construction  are  a  permanent  part  of  the  street.  There  is 
no  economy  in  cheap  or  hasty  construction.  Every  city  should 
reserve  the  right  to  supervise  this  work  and  compel  its  renewal 
whenever  necessary.  Nothing  but  the  best  should  be  toler¬ 
ated.  Heavy  rails  properly  laid  will  not  only  prevent  injury 
to  the  general  public  using  the  street  but  will  go  far  toward 
correcting  the  noise  evil.  Useless  noise  is  also  made  by 
cars  whose  trucks  are  not  enclosed  and  by  those  that  are  out 
of  repair.  The  remedy  for  this  is  to  reserve  to  the  city 
and  the  state  the  right  of  inspection  and  approval  of  street 
railway  equipment  and  the  right  to  compel  repairs  when 
needed.  Street  railways  are  also  great  dust  breeders.  Dur¬ 
ing  dry  weather  the  swift  movement  of  the  cars  keeps  the 
dust  constantly  stirred  up.  The  franchise  should  require  the 
company  to  sprinkle  its  road-bed  and  a  strip  on  each  side  as 
often  as  may  be  necessary  to  keep  the  dust  down.  Poisonous 
fumes  from  escaping  gas  may  be  for  the  most  part  suppressed 
by  requiring  the  company  to  provide  an  adequate  system  for 
discovering  and  stopping  leakage.  The  company’s  own 
interest,  unless  those  in  control  are  mere  exploiters,  will  make 
it  watchful  for  leaks  in  the  mains,  where  every  foot  of  gas 
that  escapes  is  a  direct  loss  to  the  company,  but  leaks  in 
houses  are  likely  to  be  viewed  with  complacency  by  the  com¬ 
pany  inasmuch  as  the  gas  lost  runs  through  the  consumer’s 
meter  and  is  paid  for  by  him.  In  the  telephone  service  a 
nuisance  is  often  created  by  the  carelessness  of  operators  in 
calling  wrong  numbers  or  cutting  off  subscribers  in  the  midst 
of  their  conversations.  Or  the  wires  may  roar  because  there 
is  something  wrong  with  the  apparatus.  Such  annoyances 
cannot  be  guarded  against  with  absolute  effectiveness  in  the 
franchise,  but  the  company  should  he  specifically  required 
not  to  maintain  a  nuisance  and  should  be  obligated  to  give  an 
efficient  service. 

71-  The  furnishing  of  service  made  compulsory — A  com¬ 
pany  furnishing  a  public  utility  would  often  have  it  in  its 
power  to  inflict  irreparable  injury  on  particular  individuals 
simply  by  refusing  to  supply  them.  The  opportunity  to 
punish  enemies  in  this  way  would  be  too  great  a  temptation 
to  tyranny  to  be  lodged  in  government  itself,  to  say  nothing 


80 


MUNICIPAL  FRANCHISES. 


of  a  private  corporation.  It  is  one  of  the  fundamental 
requisites  of  a  franchise  that  it  should  compel  its  holder  to 
supply  all  applicants  for  service  within  its  territory  at  the 
regular  rates  and  on  the  regular  conditions.  A  public  serv¬ 
ice  is  not  a  private  business.  A  franchise  holder  must  know 
no  friends  and  no  enemies  in  its  relations  to  individual 
citizens.  But  the  refusal  of  a  company  to  furnish  service 
when  demanded  by  a  responsible  citizen  may  be  based  not 
upon  caprice  or  personal  reasons,  but  upon  the  fact  that  the 
company’s  lines  do  not  yet  extend  to  the  applicant’s  premises. 
In  such  cases,  the  question  involved  is  one  of  expansion  to  meet 
the  needs  of  the  people.  We  have  already  discussed  the 
requirement  that  lines  should  be  extended  into  territory  not 
yet  profitable  as  a  means  of  curtailing  a  company’s  monopoly 
profits  while  at  the  same  time  conferring  public  benefit.  The 
question  we  are  now  considering  is  somewhat  different.  On 
account  of  stupid  management  or  on  account  of  inadequate 
financial  backing  a  company  may  often  neglect  to  extend 
its  lines  where  it  could  unquestionably  have  a  profitable  busi¬ 
ness.  The  results  are  extremely  damaging  to  individual 
citizens  whose  residences  or  places  of  business  do  not  happen 
to  be  located  in  the  district  or  along  the  streets  already  ex¬ 
ploited.  Whatever  requirements  are  dictated  by  public  policy 
in  the  matter  of  extensions  of  plant  and  fixtures  in  unde¬ 
veloped  and,  for  the  time,  unprofitable  territory,  there  is  not 
the  slightest  question  but  that  the  franchise  of  any  public 
utility  should  be  forfeitable  if  its  holder  fails  either  through 
incompetence  or  through  wilful  neglect  to  extend  its  lines 
and  supply  service  in  every  place  where  the  demand  is 
sufficient  to  make  it  possible  to  do  so  without  loss. 

There  are  several  possible  ways  in  which  extensions  may  be 
required.  Gas,  water  and  conduit  companies  may  be  re¬ 
quired,  as  a  matter  of  general  policy,  to  place  their  fixtures 
in  the  streets  in  advance  of  permanent  paving.  This  would 
often  be  in  advance  of  demand  for  service,  especially  in  the 
sections  where  real  estate  is  platted  for  high-priced  residences 
and  street  improvements  are  made  in  advance.  In  other  sec¬ 
tions,  where  population  precedes  paving,  such  a  requirement 
would  at  least  prevent  still  further  delay  in  supplying  any 
particular  utility  after  the  paving  stage  has  been  reached. 
If  the  question  of  probable  profit  is  to  be  considered  in  con- 


INJURIES  TO  INDIVIDUALS. 


81 


nection  with  the  requirement  of  extensions,  it  is  to  be  noted 
that  the  greater  cost  of  construction  after  the  paving  is  down 
may  make  unprofitable  what  otherwise  would  have  been  a 
very  profitable  extension.  A  franchise  holder  should  not  be 
permitted  to  take  advantage  of  his  own  negligence  in  such 
cases,  to  the  injury  of  would-be  patrons.  It  is  manifestly 
proper  to  require  an  extension  for  the  purpose  of  supplying 
an  individual  applicant  who  is  located  within  a  certain  fixed 
distance  of  already  existing  lines.  This  would  apply  to 
central  heating  companies  and  overhead  telephone  and  electric 
light  companies  as  well  as  to  gas,  water  and  conduit  companies. 
Extensions  of  any  public  utility  might  be  required  when 
ordered  by  the  city  council,  or  the  proper  administrative  officer 
of  the  city,  or  when  the  necessity  and  profitableness  of  the 
venture  have  been  determined  by  a  court  or  by  means  of  arbitra¬ 
tion,  or  when  population  in  the  district  to  be  supplied  has 
reached  a  certain  density,  or  when  the  applicants  are  willing 
to  guarantee  sufficient  business  to  protect  the  company  from 
actual  loss  by  reason  of  the  extensions.  In  certain  unusual 
circumstances  individuals  are  even  willing  to  pay  the  original 
cost  of  the  extension  in  order  to  get  the  service.  Certainly, 
under  such  conditions,  the  extensions  should  be  made  with¬ 
out  further  question.  The  extension  of  a  telephone  system  to 
meet  the  demands  of  a  multitude  of  possible  patrons  may  be 
secured  by  requiring  the  company  to  adopt  a  schedule  of 
rates,  based  on  actual  or  estimated  number  of  calls,  that  will 
lend  itself  to  the  development  of  the  general  use  of  telephones. 
In  this  case,  injury  to  individuals  by  refusal  to  supply  the 
service  is  to  be  prevented  by  a  regulation  of  rate  schedules 
rather  than  by  a  direct  requirement  to  extend  its  lines. 

72.  Discrimination  in  rates  forbidden.— In  the  preceding 
section  it  has  been  suggested  that  a  public  utility  should  be 
supplied  to  all  applicants  at  established  rates.  This  rule 
would  not  only  prevent  a  refusal  to  supply  particular  ap¬ 
plicants,  but  would  prevent  discrimination  as  between 
individual  patrons.  To  begin  with,  we  can  certainly  agree 
that  rate  schedules  should  be  public  so  that  every  applicant 
for  service  shall  be  on  the  same  footing  as  every  other  ap¬ 
plicant  in  similar  circumstances.  Where  this  is  not  the  case 
rank  injustice  is  likely  to  be  the  result.  Under  the  exigencies 
of  competition,  where  there  are  rival  companies  in  the 


82 


MUNICIPAL  FRANCHISES. 


same  field  for  a  while,  or  when  a  new  utility  is  first  being 
developed,  secret  contracts  are  sometimes  made  to  give  service 
to  certain  influential  persons  or  certain  large  consumers  at 
special  rates.  Such  practices  should  be  absolutely  forbidden 
and  should  work  a  forfeiture  of  the  franchise.  The  enforce¬ 
ment  of  this  condition  will  be  easier,  if  the  franchise  provides 
for  publicity  of  the  accounts  of  the  company,  giving  the  proper 
city  authorities  on  their  own  motion  or  on  the  complaint  of 
any  patron  of  the  public  service  corporation,  the  right  to 
examine  all  the  books,  documents  and  vouchers  of  the  com¬ 
pany  relating  to  contracts  and  payments  for  service. 

The  difficult  problem  of  discriminating  rates  as  between 
different  classes  of  consumers,  based  upon  various  theories  of 
public  policy  and  cost  of  service,  has  already  been  discussed 
to  a  certain  extent  in  section  52.  In  this  place  we  need  only 
to  emphasize  again  the  public  aspect  of  public  utility  busi¬ 
ness  and  the  consequent  importance  of  fixing  rates,  not 
entirely  for  the  benefit  of  revenue  and  not  entirely  from  the 
standpoint  of  cost  of  service,  but  from  the  standpoint  of 
social  necessities.  It  is  profoundly  important  to  the  city  and 
the  state  that  the  opportunities  of  all  citizens  should  so  far 
as  possible  be  equalized.  For  this  reason,  there  is  a  powerful 
argument  in  favor  of  a  uniform  flat  rate  for  every  consumer, 
or  in  cases  where  measured  rates  are  necessary,  a  uniform 
rate  per  unit  of  use  to  all  consumers  alike.  In  a  decision 
handed  down  October  6,  1899,  Justice  Mitchell  of  the  Supreme 
Court  of  Pennsylvania,  took  the  position  that  a  company 
organized  for  the  purpose  of  supplying  natural  gas  to  con¬ 
sumers  for  heat  and  light,  was  not  authorized  to  charge  dif¬ 
ferent  rates  according  to  the  uses  to  which  the  gas  wras  put.1 
“  The  gas  is  brought  by  the  company/’  said  the  Judge, 
“  through  the  same  pipes  for  both  purposes  and  delivered  to 
the  customers  at  the  same  point,  the  curb.  Thence  it  goe3 
into  pipes  put  in  by  the  customer  through  his  premises  accord¬ 
ing  to  his  convenience.  The  regulation  in  question  seeks  to 
differentiate  the  price  according  to  the  use  for  heating  or 
light.  It  is  not  claimed  that  there  is  any  difference  in  the 
cost  of  product  to  the  company,  the  expense  of  supplying  it  to 
the  point  of  delivery  or  its  value  to  the  company  in  the 
increase  of  business  or  other  ways.  The  real  argument  seeks 

1  See  the  case  of  Rogers  vs.  Fayette  Gas  Fuel  Co.,  193  Pa.  State  Reports,  175. 


INJURIES  TO  INDIVIDUALS. 


83 


to  justify  the  difference  in  price  solely  by  the  value  of  the 
gas  to  the  consumer  as  measured  by  what  he  would  have 
to  pay  for  a  substitute  for  one  purpose  or  the  other  if  he 
coulcbnot  get  the  gas.  This  is  a  wholly  inadmissible  basis  of 
discrimination.  The  implied  condition  of  the  grant  of  all 
franchises  of  every  quasi-public  nature  is  that  they  shall  be 
exercised  without  individual  discrimination  in  behalf  of  all 
who  desire  ”  service. 

The  Massachusetts  Board  of  Gas  and  Electric  Light  Com¬ 
missioners  in  1907  undertook  an  inquiry  into  the  rates  charged 
by  the  Edison  Electric  Illuminating  Company  of  Boston, 
and  the  rules  according  to  which  this  company  worked  out 
its  schedule  of  charges  to  different  classes  of  consumers.1 
The  company  had  been  attempting  to  base  its  rates  upon 
<c  the  cost  of  service.”  In  its  conclusions  the  Board  stated 
that  two  considerations  vitally  affecting  the  relation  of  the 
company  to  its  consumers  had  not  received  proper  attention 
from  the  company.  One  of  these  considerations  was  that  “  a 
kilowat  hour  is  now  the  established  unit  for  measuring 
electricity,”  representing  the  definite  amount  of  electrical 
energy  that  will  do  exactly  the  same  amount  of  work  for  one 
customer  as  for  another.  The  second  consideration  which 
the  Board  called  to  the  company’s  attention  wTas  the  fact  that 
during  the  past  two  decades  the  use  of  electricity  for  light 
and  power  had  increased  with  great  rapidity  and  that  to 
serve  the  needs  of  the  community  and  to  promote  the  public 
welfare  and  convenience  the  company  had  been  given  sub¬ 
stantially  exclusive  privileges  to  extend  its  lines  throughout 
the  territory  supplied  by  it.  “  The  company  has  therefore 
a  public  duty  to  perform,”  said  the  Board,  “  and  is  bound  to 
discharge  this  duty  for  the  equal  benefit  of  all.  It  is  also  to 
be  remembered  that  it  has  but  one  service  to  render  its 
customers,  namely,  to  supply  them  with  electricity.  The 
company  conceded  that  it  cannot,  consistently  with  its  duty 
to  the  community,  supply  A  and  refuse  to  supply  B,  both 
being  within  reach  of  its  lines.  It  is  equally  clear  that  to 
charge  A  one  price  and  B  another  for  the  same  service  under 
like  conditions  is  a  violation  of  duty.  In  a  proper  conception 
of  the  nature  of  this  duty  mere  difference  in  size  of  customers 


1  Twenty-fourth  Annual  Report,  1908,  pp.  20-50. 


84 


MUNICIPAL  FRANCHISES. 


does  not  in  itself  constitute  sucli  a  difference  in  conditions  as 
to  justify  a  difference  in  price.  *  *  *  * 

“  If  all  the  customers  of  a  company  were  dependent  upon 
it  for  a  supply,  it  is  believed  that  there  wrould  be  little  occa¬ 
sion  to  discuss  or  attempt  to  justify  differential  rates,  and 
that  a  uniform  meter  rate  determined  by  reasonable  operating 
costs  and  a  fair  return  on  the  investment  reasonably  necessary 
for  the  public  convenience,  would  prevail  universally.  It  may 
be  conceded  that,  if  the  uniform  meter  rate  prevailed,  there 
would  be  some  unprofitable  customers.  This  may  be  predi¬ 
cated  with  truth  of  any  system  of  rates  for  a  public  service. 
The  Board  is  of  the  opinion,  however,  that  this  view  of  such 
a  rate  is  exaggerated,  and  that  in  any  event  it  is  likely  to 
result  in  no  greater  amount  of  injustice  than  the  attempt  to 
make  every  customer  theoretically,  if  not  actually,  profitable. 
There  can  be  no  more  desirable  requisite  for  every  public 
service  charge  than  that  it  shall  be  simple,  definite  and  readily 
understood  and  applied.” 

The  Board  then  took  up  the  question  of  so-called  “  non¬ 
contract  lighting  rates,”  which  prevailed  in  the  case  of  cus¬ 
tomers  who  could  readily  supply  themselves  with  light  or  obtain 
power  from  some  other  source  than  the  company.  “  To  such 
customers  the  value  of  the  service  furnished  by  the  company,” 
said  the  Board,  “  will  depend  to  a  considerable  extent  on  the 
probable  cost  of  supplying  themselves.  If  the  company  is  to 
supply  them,  it  is  subject  to  the  ordinary  rules  of  business 
competition, — it  must  meet  prices  established  by  conditions 
which  it  does  not  create  and  cannot  control,  or  not  do  the 
business.  The  prices  which  an  electric  light  company  must 
thus  meet  or  not  do  business  are  determined  not  by  an  open 
market,  but  largely  by  individual  conditions  which  differ 
widely  with  different  customers.  *  *  *  *  The  question 
arises  whether  or  not  the  existing  practice  of  the  company 
in  respect  to  its  prices  for  business  of  this  character  is  so  far 
inconsistent  with  its  recognized  duty  to  serve  all  without 
discrimination  that  it  should  no  longer  be  tolerated. 

“  In  considering  these  questions  it  must  not  be  forgotten 
that  the  advantage  enjoyed  by  a  customer  whose  use  of 
electricity  will  warrant  the  installation  of  his  own  supply  of 
electricity  or  power  is  one  which  the  company  cannot  prevent. 
It  i^  equally  to  be  remembered  that  there  is  always  a  strong 


INJURIES  TO  INDIVIDUALS. 


85 


temptation  to  the  manager  of  a  public  service,  if  unrestrained, 
to  maintain  a  high  rate  for  business  which  he  controls  while 
making  disproportionate  concessions  to  get  that  which  can 
take  care  of  itself.  Experience  is  also  making  more  and  more 
evident  that  the  duty  of  one  who  undertakes  a  public  service 
must  necessarily  deprive  him  of  the  right  to  base  his  policies 
upon  many  practices  common  to  and  even  commendable  in 
private  business. 

“  In  reaching  out  for  additional  business  by  making  con¬ 
cessions  from  the  average  rate,  it  is  plain  that  the  only 
justification  for  permitting  the  continuance  of  such  a  policy 
is  that  this  additional  business  will  be  for  the  benefit  of  the 
large  body  of  customers  who  must  pay  the  regular  rate.  For 
it  is  not  the  advantage  of  the  few  but  rather  the  advantage 
of  the  many  which  should  be  the  controlling  test.” 

The  Board  concluded  that  in  the  present  development  of 
the  company’s  business  it  might  be  of  substantial  advantage 
to  the  average  consumer  to  permit  the  special  rates  necessary 
to  enable  the  company  to  secure  the  business  of  the  large 
consumers,  although  recognizing  “  the  danger  of  abuse  in 
permitting  concessions  to  some  customers  not  granted  to  all.” 
The  Board  nevertheless  recognized  as  existing  “  certain 
economic  conditions  attending  the  sale  of  elecricity  which, 
in  the  interest  of  the  many  whose  needs  and  convenience  the 
company  should  serve,  seem  to  warrant  continuance  of  certain 
differences  in  prices,  not  as  a  permanent  policy,  but  until 
the  uniform  rate  recommended  can  from  time  to  time  be 
safely  reduced  so  low  as  to  be  in  itself  an  encouragement  to 
the  unrestricted  use  of  electricity  for  all  purposes.” 

73.  Inspection  of  meters  and  records  of  use. — A  flat  rate 
is  usually  charged  for  street  railway  transportation,  the  fare 
being  payable  in  advance.  In  the  larger  cities,  however, 
there  is  a  slight  tendency  toward  the  so-called  “  zone  system,” 
and  in  cities  both  large  and  small  the  tendency  toward 
universal  free  transfers  has  not  always  prevented  double  fares 
being  charged  where  there  are  two  operating  companies, 
although  both  companies  may  be  controlled  by  the  same 
interests.  It  is  only  on  the  steam  roads  and  the  interurban 
lines  that  rates  are  charged  approximately  in  proportion  to 
the  distance  traveled.  For  these  reasons  it  is  unnecessary  to 
provide  any  special  device  for  measuring  the  service  rendered 


86 


MUNICIPAL  FRANCHISES. 


to  each  particular  patron  of  a  street  railway.  The  same  is 
true  of  telephone  service  in  the  smaller  cities  where  flat  rates 
prevail,  and  of  water  supply  where  rates  are  fixed  according 
to  frontage  and  number  of  fixtures.  However,  when  it  comes 
to  gas  and  electricity  for  light  or  power,  or  to  telephone 
service  in  the  larger  cities,  some  measuring  instrument  or 
recording  device  is  required  in  order  to  show  what  the  com¬ 
pany  should  charge  its  patrons  in  their  monthly,  quarterly  or 
semi-annual  bills.  So  far  as  telephony  is  concerned,  each 
subscriber  can,  if  he  takes  the  trouble,  keep  track  of  the 
number  of  calls  given  through  his  instrument  and  the  number 
of  conversations  had.  In  this  way  he  can  check  up  the  com¬ 
pany’s  count.  Nevertheless,  it  is  a  great  deal  of  trouble 
for  him  to  do  so,  and  he  would  much  prefer  an  adequate  re¬ 
cording  device  which  would  itself  keep  the  count  without 
being  subject  to  successful  manipulation  by  the  company. 
Efforts  are  being  made  to  supply  devices  that  will  come  as 
near  to  meeting  this  requirement  as  the  nature  of  the  business 
permits,  but  the  whole  matter  is  still  in  the  experimental 
stage.  In  the  case  of  water,  gas  and  electricity,  however,  the 
individual  consumer  has  no  means  of  measuring  the  amount 
of  the  commodity  he  uses.  He  must  depend  upon  the  com¬ 
pany’s  meter.  A  meter  is  a  delicate  instrument  subject  to 
derangement  at  any  time  and  therefore  needing  comparatively 
frequent  inspection.  The  meter  is  furnished  by  the  company 
and  remains  the  company’s  property.  It  is  set,  read  and 
maintained  by  the  company.  The  consumer  has  no  means  of 
knowing  whether  it  is  registering  properly  the  amount  of  the 
commodity  consumed  by  him  except  by  comparing  his  bills 
with  those  of  other  people  or  with  his  own  at  some  previous 
time.  He  can  only  roughly  estimate  the  amount  he  uses. 
It  is  manifest  that  the  consumer’s  interests  need  to  be 
protected,  for  inevitably  the  power  of  one  party  to  the 
contract  to  fix  his  own  compensation  under  it  will  sometimes 
be  abused.  It  is  necessary  therefore  to  provide  in  franchises 
and  regulatory  statutes,  that  the  types  of  meters  to  be  used  by 
the  public  service  corporations  shall  be  subject  to  the  approval 
of  the  civic  authorities.  It  should  also  be  provided  that  any 
citizen  believing  himself  aggrieved  shall  have  a  chance  to 
appeal  to  some  public  authority  for  a  testing  of  the  meter. 
There  are  doubtless  many  complaints  the  only  excuse  for  which 


INJURIES  TO  INDIVIDUALS. 


87 


is  in  the  consumer’s  own  carelessness.  To  limit  the  expense 
and  bother  of  attending  to  such  complaints,  the  simple  device 
is  sometimes  adopted  of  requiring  the  consumer  who  wishes 
his  meter  tested  to  pay  a  fee  of  fifty  cents  or  a  dollar 
which  wTill  be  returned  to  him  if  his  meter  is  found  to  be 
more  than  a  fixed  amount,  say  two  per  cent,  fast.  It  is  one 
of  the  humors  of  the  business  that  consumers  whose 
meters  prove,  on  testing,  to  have  been  slow  sometimes  become 
very  anxious  to  get  them  back.  It  is  also  sometimes  provided 
that  all  meters  shall  be  individually  inspected  and  sealed  by 
the  public  authorities  before  being  set  for  use. 

74.  Standard  quality  of  service  required — One  of  the 
readiest  faults  of  monopoly  is  that,  freed  from  the  disagree¬ 
able  stimulus  of  competition,  it  will  lapse  into  carelessness 
about  the  efficiency  of  the  service  it  renders.  This  lack  of 
efficiency  may  take  any  one  of  a  thousand  forms.  If  it  is  the 
telephone  business  we  are  dealing  with,  the  “  hello  ”  girls  may 
become  insolent  or  heedless ;  connections  may  be  cut  off  before 
conversations  are  finished;  lines  out  of  commission  may  not 
be  promptly  repaired ;  lines  may  be  reported  as  “  busy  ”  when 
in  reality  it  is  the  operators  who  are  busy ;  the  company  may 
refuse  to  supply  adequate  fixtures,  and  so  on.  Such  de¬ 
linquencies  cannot  be  prevented  by  a  few  words  in  a  franchise 
unless  those  few  words  are  directed  toward  reserving  to  the 
city  the  right  to  supervise  service  and  compel  corrections 
where  complaints  are  found  to  be  justified.  One  very  im¬ 
portant  item  in  good  telephone  service  is  the  rule  that  the 
operator  should  notify  the  subscriber  as  soon  as  another  sub¬ 
scriber’s  line  with  which  he  desires  connection  ceases  to  be 
busy.  In  Chicago,  the  Special  Telephone  Commission  of 
1907  found  that  42,000  telephone  inquiries  for  the  “  time  of 
day  ”  came  into  “  central  ”  within  twenty-four  hours.  It  is 
doubtful  how  far  such  inquiries  should  be  encouraged,  but  it 
can  readily  be  seen  that  an  exacting  public  might  set  the 
standard  of  good  telephone  service  very  high.  It  is  desirable 
that  the  telephone  company  should  be  prepared  to  render  all 
possible  assistance  in  transmitting  calls  to  the  city  fire 
department,  to  the  police,  to  physicians  and  to  hospitals. 

On  street  railways  the  standard  of  service  may  be  forced 
up  by  a  multitude  of  different  regulations,  such  as  through 
routes,  transfers,  more  frequent  service,  seats  for  all,  more 


88 


MUNICIPAL  FRANCHISES. 


rapid  transit,  better  heating  and  ventilation  of  cars,  courtesy 
on  the  part  of  conductors,  a  smooth  road-bed  and  tracks 
kept  in  repair,  muffled  wheels  and  other  devices  to  lessen  the 
grinding,  shrieking  noises  of  the  trolley  line.  Some  of  these 
requirements  can  be  provided  for  specifically  in  the  franchise 
grant,  but  many  of  them  can  be  secured  only  through  con¬ 
stant  regulation  and  supervision. 

In  the  supply  of  gas  and  electricity,  the  companies  may 
inflict  injury  upon  individuals  by  furnishing  poor  light  or 
intermittent  service.  Perhaps  in  the  case  of  gas  the  pressure 
may  be  too  great  for  the  lamps  or  too  little  for  the  gas  range. 
Such  difficulties  may  be  met  by  franchise  requirements  or 
ordinance  regulations  fixing  the  candle-power  of  the  gas  or 
the  electric  current;  by  regulating  the  pressure  and  heat¬ 
giving  qualities  of  the  gas ;  by  requiring  duplicate  machinery 
to  provide  against  a  break-down  in  the  supply  of  electricity  or 
water  as  the  case  may  be.  In  general,  the  franchise  should 
provide  for  continuous  service  and  high-grade  efficiency. 

75.  Safety  regulations  made  and  appliances  required. — 
After  all,  though  the  patrons  of  a  public  utility  may  be 
seriously  inconvenienced  and  even  financially  injured  by 
inadequate  service  and  corporate  indifference,  the  danger  re¬ 
quiring  the  most  careful  attention  is  the  danger  of  killing 
people  or  maiming  them  as  an  incident  to  the  performance  of 
the  service.  Indeed  this  danger  is  not  limited  to  patrons  of 
the  utility,  but  extends  to  the  general  public  as  well.  While 
it  is  true  that  an  infected  water  supply  will  not  directly  injure 
anybody  who  does  not  drink  of  it,  yet  the  universality  of  the 
uses  of  water  and  the  free  way  in  which  it  is  distributed  prac¬ 
tically  make  it  impossible  for  any  citizen  to  be  sure  of  avoid¬ 
ing  infection  if  the  general  water  supply  of  the  city  is  laden 
with  typhoid  germs.  It  is  still  more  obvious  in  the  case  of 
electric  railways  and  systems  of  distributing  electric  light 
and  power  that  the  danger  has  little  or  no  relation  to  the 
question  of  use  of  the  service.  A  broken  wire  in  the  street 
will  electrocute  a  man  if  he  touches  it  whether  or  not  he  has 
electric  light  in  his  house.  A  two-year  old  baby  who  never 
gets  farther  from  home  than  the  other  side  of  the  street  is 
as  apt  to  be  run  down  by  a  passing  car  as  is  the  workman 
who  boards  the  car  twice  a  day  going  to  and  from  his  work. 
“  Dead  Man’s_Curve  ”  and  “  Death  Alley7’  in  New  York  did 


INJURIES  TO  INDIVIDUALS. 


89 


not  receive  their  names  from  the  risks  passengers  run  at 
these  points.  On  the  other  hand,  the  telephone  user  has  an 
extra  risk,  not  shared  by  the  public,  of  being  shocked  or 
killed  when  the  wire  comes  in  contact  with  a  high  tension 
wire  through  somebody’s  carelessness.  In  1902,  there  were 
1218  persons  killed  and  47,429  injured  by  street  and  elec¬ 
tric  railways  in  the  United  States.1  These  unfortunates,  if 
established  in  a  colony  by  themselves,  would  make  quite  a 
city-full.  Of  the  1218  killed,  only  265  were  passengers  and 
122  employees;  while  of  the  47,429  reported  injured,  26,690 
or  considerably  more  than  half  were  passengers.  These  fig¬ 
ures  would  indicate  that  there  is  more  likelihood  of  accidents 
being  fatal  where  cars  strike  people  who  are  on  the  tracks 
than  there  is  when  the  injured  are  riding  on  the  cars.  There 
are  two  or  three  primary  requirements  for  safety  in  connec¬ 
tion  with  street  railway  transportation.  Fenders  or  wheel- 
guards  must  be  provided  to  pick  people  up  or  throw  them  off 
the  track  and  prevent  them  from  being  ground  to  death 
under  the  wheels.  Speed  must  be  limited,  especially  in  nar¬ 
row  or  crowded  streets,  so  as  to  give  people  time  to  get  out 
of  the  way.  Brakes  by  the  use  of  which  the  cars  can  be 
stopped  very  quickly,  must  be  provided.  The  writer’s  at¬ 
tention  was  once  called  to  the  statement  of  an  experienced 
motorman  in  a  large  city  to  the  effect  that  the  air  brakes 
with  which  the  cars  were  equipped  were  often  out  of  repair 
so  that  only  one,  or  two,  or  three  of  the  four  brakes  would 
work  at  all.  He  explained  that  motormen  got  censured  for 
sending  their  cars  to  the  repair  shop  if  only  one  or  two 
brakes  were  disabled.  He  asserted  that  with  all  four  brakes 
in  good  order  a  car  could  be  stopped  in  its  own  length,  while 
as  a  matter  of  fact  with  a  part  of  the  brakes  not  working,  it 
took  the  motormen  half  a  block  to  stop.  The  state  of  affairs 
described  by  this  motorman  is  criminal. 

With  electrical  companies,  the  thing  to  be  provided  for  is 
proper  insulation  and  a  sufficient  number  of  poles,  if  over¬ 
head  construction  is  used,  to  minimize  the  danger  of  the 
breaking  of  the  wires.  As  in  many  other  things  we  have  dis¬ 
cussed,  so  in  this  matter  of  safety  appliances  and  regulations, 
the  only  thoroughly  effective  way  to  handle  the  problem  is 

1  “  Street  and  Electric  Railtvays,  1902,'"  issued  as  a  special  report  of  the  Bureau 
of  the  Census,  p.  15. 


90 


MUNICIPAL  FRANCHISES. 


not  by  elaborate  franchise  provisions,  but  by  reserving  to  the 
public  authorities  the  right  of  regulation  to  be  exercised  from 
time  to  time  as  occasion  may  require.  It  is  also  important 
that  in  the  matter  of  high  tension  wires  construction  work 
be  subject  to  inspection  and  approval  by  the  proper  city  offi¬ 
cial.  Types  of  fenders,  brakes  and  other  safety  appliances 
should  be  subject  to  public  approval  before  they  are  generally 
installed. 

76.  Requiring  underground  construction. —The  removal 

of  overhead  wires  from  the  streets  has  advantages  in  two 
directions:  safety  and  civic  beauty.  The  presence  of  a  net¬ 
work  of  telegraph,  telephone,  electric  light,  electric  power  and 
trolley  wires  suspended  above  the  streets  in  a  great  city  is 
a  constant  menace  to  individual  safety.  If  the  wTires  break  or 
get  crossed  or  through  any  mischance  a  person  comes  in  con¬ 
tact  with  them,  serious  personal  injury  or  even  death  is 
likely  to  be  the  result.  Furthermore,  the  presence  of  the 
overhead  wires  in  the  street  in  front  of  a  building  is  likely 
to  hamper  the  firemen  in  using  their  apparatus  to  put  out 
fires,  and  may  therefore  be  responsible  for  the  destruction  of 
the  building.  A  movement  to  force  the  wires  underground 
in  congested  centers  of  population  began  nearly  thirty  years 
ago  at  the  time  when  the  heavily  charged  electric  light  wires 
began  to  multiply.  This  movement  did  not  succeed  until 
after  a  tremendous  struggle  with  the  companies.  It  is  now  a 
well-established  policy,  however,  in  large  cities  and  cities 
that  hope  to  be  large  to  include  in  new  franchise  ordinances 
to  telephone,  telegraph  and  electric  light  and  power  com¬ 
panies  a  clause  requiring  the  grantees  to  put  their  wires  un¬ 
derground  within  certain  specified  districts.  The  franchise 
may  fix  the  date  before  which  this  work  must  be  done;  or  it 
may  simply  provide  that  the  work  shall  be  done  when  re¬ 
quired  by  resolution  or  ordinance  of  the  city  council;  or  it 
may  reserve  to  the  council  or  the  administrative  board  or 
officer  in  control  of  the  streets  the  right  to  require  the  wires 
to  be  put  underground  in  additional  districts  to  be  de¬ 
limited  from  time  to  time.  Sometimes  the  policy  adopted  is 
for  the  city  itself  to  build  conduits  and  force  the  companies 
to  use  them  on  payment  of  a  suitable  rental.  In  other  cases 
a  special  conduit  franchise  is  granted  to  a  company  which  is 
required  to  furnish  underground  space  for  the  use  of  all  wire 


INJURIES  TO  INDIVIDUALS. 


91 


companies  occupying  the  streets.  The  placing  of  wires  un¬ 
derground  is  an  expensive  operation,  especially  in  streets 
where  excavation  is  difficult  or  where  the  soil  is  already  oc¬ 
cupied  by  a  miscellaneous  aggregation  of  underground  struc¬ 
tures.  Sometimes  the  space  under  the  sidewalks  can  be  used 
for  this  purpose,  although  in  other  cases  this  may  prove  im¬ 
practicable  because  the  city  has  already  given  to  abutting 
property  owners  the  exclusive  use  of  this  space  for  area  ways 
and  storage  vaults.  This  leads  to  the  observation  that  such 
grants  to  property  owners  should  always  be  revocable  at  the 
pleasure  of  the  city  authorities,  or  at  least  should  reserve  to 
the  city  the  right  to  use  the  space  so  far  as  needed  for  the 
installation  of  conduits  by  itself  or  by  a  company  to  which 
a  conduit  franchise  has  been  granted  or  which  is  required  to 
place  its  wires  underground.  A  much  more  difficult  problem 
is  presented  in  the  removal  of  overhead  trolley  wires  and  the 
substitution  of  the  underground  electric  system  for  the  pro¬ 
pulsion  of  street  cars.  For  this  change  separate  conduits  in 
certain  definite  locations  provided  with  slots  and  extra  iron 
work  in  the  surface  of  the  streets  are  required.  This  system 
of  construction  is  so  expensive  that  it  has  never  been  en¬ 
forced  on  a  large  scale  in  this  country  except  in  the  city  of 
Washington  and  on  Manhattan  Island  in  New  York  City. 
While  it  is  not  considered  necessary  at  the  present  time  to 
enforce  the  adoption  of  the  underground  system  for  street 
railways  except  in  the  most  congested  centers,  care  should  be 
taken  in  granting  any  street  railway  franchise  that  is  to  run 
for  a  considerable  period  of  years,  not  to  authorize  the  con¬ 
tinuance  of  the  overhead  system  for  the  whole  period  with¬ 
out  regard  to  future  exigencies.  The  hardship  involved  in 
the  extra  cost  of  original  construction  where  wires  are 
placed  underground  is  somewhat  mitigated  by  economies  in 
maintenance  where  the  wires  are  safely  housed  in  conduits 
and  there  are  no  poles  to  rot  or  be  blown  down. 

77.  Special  training  of  employees  required — It  is  a 
common  thing  for  street  railway  companies  to  be  required  by 
their  franchises  to  employ  prudent  and  careful  motormen 
and  conductors.  Telephone  companies  might  well  be  re¬ 
quired  to  employ  skilful  and  courteous  “  hello  girls.”  In 
general  the  interests  of  the  companies  and  of  their  patrons 
are  identical  so  far  as  the  desirability  of  the  employees  being 


92 


MUNICIPAL  FRANCHISES. 


skilful  and  courteous  are  concerned.  If  the  companies  are 
controlled  by  men  primarily  interested  in  rendering  the  serv¬ 
ice  for  which  the  franchise  is  given  rather  than  in  looting 
the  property  and  building  up  great  personal  fortunes  by 
manipulation  of  securities  according  to  the  approved  method 
of  grand  larceny  or  as  Mr.  Bryan  has  termed  it,  c<  glorious 
larceny,”  there  will  be  very  little  need  of  detailed  franchise 
provisions  or  regulations  by  law  or  ordinance  describing  the 
qualifications  necessary  for  street  railway  motormen  and  tele¬ 
phone  girls.  Nevertheless,  until  the  holders  of  a  franchise 
really  get  it  into  their  heads  that  they  are  conducting  a  pub¬ 
lic  business  and  are  responsible  for  its  conduct  to  regularly 
constituted  public  authorities,  there  will  always  be  a  chance 
that  a  conductor  may  start  a  car  while  passengers  are  getting 
off  or  on,  or  that  a  telephone  operator  will  cut  a  subscriber 
off  while  he  is  in  the  midst  of  a  conversation,  or  that  an  elec¬ 
tric  light  lineman  will  “  butcher  ”  a  beautiful  shade  tree  in 
order  to  put  a  wire  through.  For  the  construction  and  opera¬ 
tion  of  public  utility  plants,  the  highest  grade  of  skilled  serv¬ 
ice,  with  reference  to  the  nature  of  each  particular  piece  of 
wrork,  is  required.  In  the  organization  of  modern  society, 
each  individual  is  compelled  on  many  occasions  to  place  his 
life  or  his  property  in  the  power  of  persons  over  whom  he 
has  no  direct  control.  It  is  the  business  of  the  city  or  the 
state,  in  granting  franchises  and  regulating  their  use,  to  pro¬ 
tect  the  individual  citizen  against  the  danger  of  injury  at 
the  hands  of  incompetent,  careless  or  capricious  persons  em¬ 
ployed  to  occupy  these  positions  of  trust.  In  the  nature  of 
the  case  the  multiplication  of  the  agencies  of  danger  in 
modern  life,  coupled  with  the  inevitable  carelessness  of  some 
members  of  the  public  and  the  helplessness  of  others,  will 
result  in  many  tragedies.  It  is  intolerable  that  the  number 
or  seriousness  of  these  should  be  increased  by  corresponding 
carelessness  or  inability  on  the  part  of  those  directly  charged 
with  operation  of  these  agencies  of  danger.  It  is  well,  there¬ 
fore,  that  the  natural  interests  of  a  well-ordered  public  serv¬ 
ice  corporation  should  be  bolstered  up  by  specific  franchise 
provisions  requiring  the  employment  of  only  skilled  men 
to  occupy  positions  requiring  skill.  This  is  all  the  more 
necessary,  as  aldermen  and  politicians  sometimes  try  to 
bring  under  their  own  control  the  patronage  of  public  service 


INJURIES  TO  INDIVIDUALS. 


93 


corporations.  Indeed,  the  importance  of  this  matter  would 
justify,  if  deemed  necessary,  the  establishment  of  civil  serv¬ 
ice  rules  and  the  preparation  by  a  publicly  constituted  com¬ 
mission  of  lists  of  eligibles  for  appointment  to  places  in  the 
service  of  the  public  utility  companies  operating  under  fran¬ 
chises. 

78.  Easy  identification  of  responsible  company  required. — 

Public  service  corporations,  especially  street  railway  com¬ 
panies,  are  undoubtedly  made  the  prey  of  numberless  petty 
lawyers  who  make  it  a  business  to  work  up  damage  suits 
against  them.  Possibly  it  is  this  fact  that  has  led  operating 
companies  in  some  cases  to  cloud  the  evidence  of  their 
responsibility  by  a  tangled  web  of  paper  agreements  and  inter¬ 
company  contracts.  For  example,  most  of  the  street  railway 
mileage  of  Brooklyn,  as  well  as  a  number  of  old  steam  roads 
now  operated  by  electricity,  are  owned  by  companies  whose 
stock  is  held  by  the  Brooklyn  Rapid  Transit  Company,  a 
business  corporation  that  has  no  right  under  the  law  to 
operate  a  car.  As  a  matter  of  fact  there  are  seven  operating 
companies  in  the  Brooklyn  Rapid  Transit  System,  besides  a 
subsidiary  company  which  furnishes  power  and  equipment 
for  the  operating  companies.  The  caps  of  conductors  and 
motormen  on  all  the  lines  are  marked  “  B.  R.  T.”  and  the 
cars  are  marked  in  large  letters  “  Brooklyn  Rapid  Transit.” 
In  some  cases  the  initials  of  the  company  owning  a  particular 
car  may  be  found  on  it,  painted  in  small  letters  in  an  incon¬ 
spicuous  place,  but  even  this  designation  has  no  reference  to 
the  actual  responsibility  for  the  operation  of  the  car,  for  it 
may  be  at  the  time  in  use  by  an  entirely  different  company. 
To  make  matters  worse,  on  through  lines,  both  elevated  and 
surface,  from  the  Brooklyn  Bridge  to  Coney  Island,  respon¬ 
sibility  for  operation  is  transferred  from  one  company  to 
another  without  any  change  of  cars  or  employees  and  abso¬ 
lutely  without  any  sign  to  notify  passengers  of  their  transfer 
from  the  custody  of  one  corporation  to  that  of  another.  If 
a  person  receiving  an  injury  brings  suit  for  damages  against 
the  wrong  company,  his  case  is  thrown  out  of  court.  The 
situation  in  other  parts  of  Greater  New  York,  though  not 
exactly  the  same,  is  similar.  Indeed,  the  confusion  extends 
to  the  gas  and  electric  companies,  which,  though  maintaining 
many  separate  organizations,  are  for  the  most  part  controlled 


94 


MUNICIPAL  FRANCHISES. 


and  in  some  cases* are  actually  operated,  by  certain  big 
central  companies.  Such  a  condition  of  affairs  is  intolerable 
from  any  reasonable  standpoint.  A  clause  should  be  inserted 
in  every  public  utility  franchise  requiring  that  the  grantee, 
on  pain  of  forfeiture,  should  place  on  record  with  the  proper 
city  authorities  the  proof  of  any  assignment  of  the  franchise 
or  of  any  lease  or  contract  for  operation  under  it.  This 
clause  should  also  provide  that  every  employee  engaged  in 
the  operation  of  a  public  utility  or  in  the  maintenance  or 
repair  of  a  public  utility  plant  should  carry  in  a  conspicuous 
place  on  his  person  the  name  of  the  company  employing  him 
and  upon  which  the  public  may  place  responsibility  for  his 
acts.  It  should  also  be  required  that  every  car  in  operation, 
every  pole  maintained  in  the  streets,  every  meter  used  and 
every  other  important  instrument  used  in  connection  with  a 
public  utility  should  bear  in  a  conspicuous  place  the  name 
of  the  company  that  is  legally  responsible  for  its  operation, 
maintenance  and  repair.  In  the  case  of  passenger  cars, 
along  with  the  name  of  the  operating  company,  its  official 
address  and  the  names  of  its  president,  secretary  and  general 
manager  should  be  given.  A  franchise  should  also  provide 
that  in  case  of  its  assignment  to  or  ownership  by  any  person 
or  company  holding  other  franchises  covering  part  or  all  of 
the  same  territory  for  the  same  kind  of  service,  the  owning 
or  operating  company  shall  file  with  the  city  authorities 
from  time  to  time  a  statement  of  exactly  what  fixtures  are 
constructed  and  operated  under  each  franchise  held  by  it. 
The  purpose  of  these  various  provisions  is  that  any  citizen 
or  public  official  shall  be  able  to  ascertain  with  the  least  pos¬ 
sible  trouble  just  what  company  is  responsible  for  the  oper¬ 
ation  of  any  particular  utility  at  any  given  time  and  place, 
and  just  what  franchises  for  any  particular  utility  are  out¬ 
standing,  who  owns  them  and  to  what  extent  each  one  of 
them  is  in  use  at  any  given  time.  This  is  a  matter  of  such 
grave  importance  in  clarifying  the  relations  between  the  city 
and  the  public  on  the  one  side  and  the  companies  on  the 
other  that  it  should  never  be  neglected  in  connection  with 
anv  franchise  grant  of  any  kind. 

79.  Interference  with  other  users  of  the  streets — The 
amount  of  space  in,  over  or  under  the  streets  available  for 
various  uses  is  obviously  limited.  This  fact  constitutes  one 


INJURIES  TO  INDIVIDUALS. 


95 


of  the  chief  elements  of  value  in  old  franchises  under  which 
gas  pipes,  for  instance,  were  laid  many  years  ago,  before  the 
streets  were  crowded  with  subsurface  structures  and  perhaps 
before  expensive  pavements  were  laid.  Indeed,  the  physical 
value  of  gas  pipes,  based  upon  the  cost  of  reproduction  less 
depreciation,  may  be  greater  than  it  was  when  the  pipes  were 
laid  a  generation  ago.  This  increase  of  value  may  be  due  in 
part  to  increased  cost  of  iron  piping,  higher  wages,  etc.,  but  it 
is  also  due  in  large  part  to  the  increased  difficulty  in  finding 
a  place  for  pipes  and  the  increased  cost  of  readjusting  the 
pipes  and  other  fixtures  already  laid  and  of  cutting  through 
and  relaying  expensive  pavements.  It  is  a  well-established 
rule  of  franchise  interpretation  that  in  spite  of  this  obvious 
advantage,  the  company  first  in  the  street  is  entitled  to  undis¬ 
turbed  possession  of  the  space  it  necessarily  occupies.  For  this 
reason  new  franchises  are  granted  on  condition  that  the 
grantees  shall  not  unnecessarily  interfere  with  fixtures  already 
in  the  streets  and  shall  bear  the  cost  of  relaying  or  rearranging 
them  wherever  they  have  to  be  moved  in  order  to  make  room 
for  the  new  fixtures.  This  rule  is  obviously  unjust  to  new  com¬ 
panies,  whether  they  are  companies  proposing  to  compete  with 
those  whose  fixtures  are  already  down,  or  companies  proposing 
to  install  new  kinds  of  public  utilities.  The  fact  that  gas  has 
been  in  use  for  nearly  100  years  while  electricity  for  light¬ 
ing  was  introduced  hardly  thirty  years  ago  is  no  reason  why 
gas  pipes  should  have  any  preference  of  position  over  elec¬ 
trical  conduits,  or  why  the  newer  utility  should  bear  the 
whole  cost  of  finding  a  place  for  itself  in  the  streets  while 
the  older  utility  enjoys  an  income  sufficient  to  pay  a  reason¬ 
able  return  on  the  present  value  of  its  plant  which  has  enor¬ 
mously  appreciated  just  on  account  of  the  increases  in  the 
number  of  uses  of  the  street.  All  franchise  utilities  which 
are  of  equal  importance  to  the  public  should  have  equal 
privileges  in  the  streets  without  regard  to  priority  of  time. 
This  means  that  if  an  old  gas  company’s  pipes  have  to  be 
moved  in  order  to  make  room  for  conduits,  water  pipes  or 
underground  street  railway  construction  the  gas  company 
should  bear  at  least  a  portion  of  the  expense  of  getting  out 
of  the  way.  If  the  city  had  sufficient  foresight  to  apportion 
the  space  beneath  the  streets  from  the  beginning  and  reserve 
adequate  free  spaces  for  all  new  uses,  the  problem  of  read- 


96 


MUNICIPAL  FRANCHISES. 


justment  would  not  arise.  But  even  with  the  exercise  of  the 
highest  degree  of  intelligence,  foresight  can  make  only  ap¬ 
proximate  provisions  for  the  needs  of  the  future.  The  city 
should,  of  course,  keep  detailed  maps  showing  the  location  of 
all  fixtures  under  the  streets.  All  new  fixtures  should  then 
be  placed  in  locations  assigned  to  them  by  the  proper  city 
authorities,  and  if  old  fixtures  have  to  be  moved  the  expense 
should  be  apportioned  between  the  old  and  the  new  companies. 
In  order  that  there  may  be  no  difficulty  on  this  point, 
every  franchise  should  reserve  to  the  city  the  right  to  deter¬ 
mine  the  locations  of  the  fixtures  to  be  laid  in  the  streets, 
and  to  change  such  locations  from  time  to  time  when  neces¬ 
sary  for  the  accommodation  of  other  grantees  having  rights 
in  the  public  ways,  the  cost  to  be  borne  in  the  manner  already 
suggested.  Every  company  should  be  required  as  a  matter 
of  course  to  settle  for  any  wanton,  careless  or  unnecessary 
damage  it  does  to  the  fixtures  of  another  company  already  in 
the  street.  Special  attention  should  be  given  to  the  matter 
of  electrolysis.  The  injury  inflicted  upon  underground  pipes 
by  the  passage  of  heavy  electrical  currents  along  them  is  so 
gradual  and  so  difficult  of  discovery  that  it  is  not  sufficient 
to  require  the  company  whose  current  does  the  damage  to 
pay  for  it  when  the  extent  of  it  has  been  ascertained.  In 
addition  to  this  requirement  provision  should  be  made  to 
prevent  the  injury  by  the  proper  binding  of  the  rails  of  elec¬ 
tric  railways  and  for  other  devices  calculated  to  confine  the 
return  electric  current  to  the  channel  provided  for  it  by  the 
company  to  which  it  belongs.  A  stray  current  of  electricity 
dodging  around  through  the  ground  finding  its  way  back 
home  as  best  it  can  is  a  decidedly  dangerous  factor  in  the 
underground  world.  In  the  case  of  electrical  conduits  a 
company  receiving  a  franchise  first  is  sometimes  required  to 
construct  more  ducts  than  it  needs  for  its  own  use  and  to 
reserve  the  excess  number  for  the  use  of  the  city  or  another 
company  which  may  receive  a  franchise  later.  In  case  an¬ 
other  company  uses  them  it  is  required  to  recoup  the  first 
company  for  their  proportionate  cost.  The  duplication  of 
street  railway  tracks  in  any  particular  street  is  seldom 
admissible.  A  new  company  receiving  a  franchise  would  not 
be  justified  in  constructing  new  tracks  that  would  interfere 
with  the  use  of  tracks  already  there.  To  provide  against 


INJURIES  TO  INDIVIDUALS. 


97 


such  a  contingency  two  or  more  companies  are  sometimes 
given  the  right  to  construct  the  tracks  jointly  and  use  them 
in  common,  or  one  company  is  given  the  right  to  use  the 
other  company’s  tracks  upon  payment  of  part  of  the  cost 
of  construction  and  maintenance,  or  the  city  reserves  the 
right  to  permit  other  companies  in  the  future  to  use  the 
tracks  upon  payment  of  a  proper  rental.  In  like  manner  a 
company  when  authorized  to  establish  a  line  of  poles  in  the 
streets  may  be  required  to  make  provision  for  the  wires  of 
the  city  or  of  other  companies.  It  is  undisputed  that  the 
number  of  independent  structures  in  the  streets  should  be 
kept  down  to  the  minimum  dictated  by  the  uses  to  which  they 
are  to  be  put.  It  is,  therefore,  a  matter  of  importance  that 
every  franchise  should  provide  for  the  joint  use  of  fixtures 
•  wherever  possible  and  should  reserve  to  the  city  the  right 
to  extend  such  joint  use  in  the  future  as  new  companies  or 
new  utilities  are  admitted  to  the  streets. 

Before  closing  this  section  we  should  speak  of  the  relation 
of  street  railway  companies  to  the  owners  of  ordinary  vehi¬ 
cles.  While  it  is  entirely  appropriate  that  a  street  car  should 
have  the  right  of  way  on  the  street  railway  tracks  as  against 
all  other  vehicles,  it  is  unfair  to  truck-men,  cab  owners,  etc., 
to  admit  street  railway  tracks  to  any  street  that  is  too  narrow 
to  permit  the  passage  of  ordinary  vehicles  on  either  side  of 
the  tracks  without  interference  from  the  cars.  In  other 
words,  while  a  special  use  naturally  limits  the  general  use 
of  a  street,  it  should  not  go  to  the  extent  of  making  the 
general  use  impossible.  In  like  manner,  poles  should  not  be 
permitted  in  streets  where  they  would  obstruct  the  passage 
of  ordinary  vehicles.  There  is  a  way  in  which  street  cars 
may  get  around  this  difficulty  of  an  obstructed  passageway. 
The  particular  means  referred  to  is  sometimes  used  in  the 
down  town  streets  of  New  York  City,  where  the  horse  car 
still  survives  the  impact  of  modern  civilization.  When  one 
of  these  horse  cars  finds  its  tracks  occupied  by  a  particularly 
persistent  line  of  trucks,  the  driver  warns  the  passengers  to 
hold  fast,  swings  his  team  out  to  one  side  and  makes  a  detour 
with  his  car  away  from  the  tracks,  bumping  along  over  the 
pavement,  till  he  is  past  the  obstruction,  when  he  swings  in 
again  to  his  ribbons  of  steel.  Street  railway  tracks,  if  im¬ 
properly  constructed,  are  likely  to  cause  great  damage  to 


98 


MUNICIPAL  FRANCHISES. 


ordinary  vehicles  by  catching  their  tires  in  the  groove  of  the 
rail  or  by  causing  the  wheels  to  slue  around  when  crossing  the 
tracks  diagonally  if  the  rails  are  not  “  flush  ”  with  the  pave¬ 
ment.  A  franchise  should  among  other  things  reserve  to  the 
proper  city  authorities  the  right  to  approve  or  disapprove  the 
type  of  rails  to  be  used  and  the  manner  of  laying  them  in  the 
streets.  To  summarize  this  whole  problem,  no  person  or 
company  should  be  granted  an  absolute  privilege  in  the  street 
to  be  used  without  reference  to  the  rights  of  the  general 
public  or  of  other  special  users  of  the  street,  present  or  future. 
Injustice  cannot  be  prevented  except  by  preserving  to  the 
city  the  continuing  right  to  readjust  and  harmonize  all 
these  special  and  general  uses. 

80.  Limitation  of  obligations  that  may]  be  imposed  upon 
consumers —  Gas  and  electric  light  companies  are  sometimes, 
unable  to  collect  their  bills  for  light  furnished  to  houses 
occupied  by  transients.  This  difficulty  has  led  to  the  require¬ 
ment  of  deposits  in  advance  from  their  new  patrons.  While 
this  plan  has  been  devised  to  meet  a  real  grievance,  it  often 
happens  that  the  deposit  required  is  so  large  as  to  cause  incon¬ 
venience  and  injustice  to  poor  men  who  can  ill  afford  to  tie 
up  the  money  in  advance  of  the  use  of  light.  Sometimes  the 
deposit  requirement  is  remitted  to  applicants  who  are  intro¬ 
duced  by  financially  responsible  parties.  It  is  desirable 
either  that  the  amount  of  the  deposit  which  a  company  may 
require  of  its  consumers  should  be  limited  in  the  franchise 
or  that  the  power  to  limit  and  prescribe  the  conditions  re¬ 
lating  to  it  should  be  reserved  to  the  city.  In  all  cases  the 
company  should  be  required  to  pay  interest  on  these 
deposits. 

Another  source  of  trouble  to  patrons  is  the  requirement 
by  the  company,  before  the  service  will  be  installed  at  all,  of 
a  contract  to  use  the  service  for  a  certain  minimum  period, 
perhaps  a  year.  The  American  people  are  frequent  movers 
and  many  of  them  are  unable  to  foretell  with  any  degree 
of  certainty  where  they  will  be  living  at  the  end  of  a  year. 
While  it  is  true  that  a  service  installed  for  a  few  months  and 
then  removed  is  likely  to  be  a  loss  to  the  company,  it  is  likely 
on  the  other  hand  that  a  service  once  installed  in  a  building 
will  continue  to  be  used  indefinitely,  even  though  the  per¬ 
sonnel  of  the  occupants  of  the  building  changes  many  times. 


INJURIES  TO  INDIVIDUALS. 


99 


Except  in  unusual  circumstances  and  where  extraordinary 
expense  is  involved,  the  company  should  not  be  permitted  to 
require  a  contract  for  any  definite  period,  at  least  not  for  any 
period  extending  beyond,  say,  three  months.  In  telephone 
service,  paid  for  at  so  much  per  call,  the  subscriber  is  often 
required  to  guarantee  and  pay  for  a  minimum  number  of 
calls  each  month.  If  a  subscriber’s  calls  run  far  below  the 
average  for  a  month  or  two,  on  account  of  his  absence  from 
home  or  other  cause,  upon  payment  of  the  minimum  guar¬ 
antee  he  should  receive  a  credit  to  apply  on  calls  which  he 
may  use  in  excess  of  the  minimum  in  succeeding  months. 
The  same  policy  may  be  followed  with  reference  to  minimum 
or  “  meter  ”  charges  for  water,  gas  and  electricity,  although 
the  injustice  of  the  opposite  policy  is  not  so  glaring  in  the 
case  of  these  utilities,  for  the  reason  that  the  companies  have 
to  go  to  the  trouble  of  reading  the  meters,  or  attempting  to 
do  so,  whether  the  amount  of  the  commodity  consumed  is 
great  or  small.  Public  utility  companies  should  not  be  per¬ 
mitted  to  impose  obligations  upon  the  consumers,  either  by 
requirement  of  excessive  deposits,  by  onerous  contracts  or 
otherwise,  that  will  do  substantial  injustice  to  any  class  of 
consumers  rich  or  poor.  Every  utility  should  be  conducted 
in  such  a  way  as  to  encourage  the  widest  reasonable  legitimate 
use  of  it  among  all  classes  of  the  people. 

81.  A  tribunal  for  hearing  complaints. — Every  active 
public  service  corporation  comes  into  direct  relations  with 
multitudes  of  people  who  as  shareholders  in  the  city  that 
granted  the  company’s  franchise,  have  the  right  to  receive 
first  class  service  at  reasonable  rates.  While  it  is  possible  in 
the  drafting  of  a  franchise  to  foresee  and  provide  against 
many  difficulties  that  would  otherwise  arise  to  plague  the 
company  and  its  patrons,  there  are  many  other  difficulties 
requiring  minute  adjustment  that  cannot  be  foreseen.  As 
the  relation  between  the  companies  and  their  patrons  is  a 
continuing  one,  and  as  the  burden  of  protecting  the  latter 
from  the  effects  of  the  monopoly  created  by  the  city  or  state 
rests  continuously  upon  the  public  authorities,  it  is  prac¬ 
tically  essential  that  some  administrative  office  or  tribunal 
should  be  established  where  the  people’s  complaints  may  be 
heard  and  adjusted.  In  some  of  the  commonwealths 
special  commissions  have  been  established  for  this  purpose. 


100 


MUNICIPAL  FRANCHISES. 


In  Seattle  a  local  utility  commissioner  has  been  appointed 
with  certain  powers  in  this  direction.  In  the  absence  of  such 
authorities  established  by  statute  or  ordinance  independently 
of  the  terms  of  existing  franchises,  it  might  be  well  in  all 
new  franchise  grants  to  make  provision  for  a  board  of  arbi¬ 
tration  or  some  other  properly  constituted  authority  to  which 
patrons  of  the  company  operating  under  the  franchise  may 
take  their  grievances.  If  this  plan  is  embodied  in  the  fran¬ 
chise  as  one  of  the  conditions  of  the  contract  the  decisions 
of  the  tribunal  so  established  will  be  more  readily  enforced 
than  they  can  be  where  the  tribunal  is  established  without 
the  consent  of  the  company.  If  the  tribunal  takes  the  usual 
form  of  a  board  of  arbitration  where  one  member  is  appoint¬ 
ed  by  the  city,  one  by  the  company  and  the  third  selected  by 
these  two,  the  city  should  reserve  the  right  to  withdraw  its 
representative  arid  substitute  a  new  one  at  any  time,  but 
in  case  of  any  such  change,  the  third  arbitrator,  if  not  sat¬ 
isfactory  to  the  city’s  representative  should  be  removed  and 
replaced  by  another  appointed  in  the  same  way  as  the  one  re¬ 
moved.  This  precaution  is  necessary  on  account  of  the  well- 
known  fact  that  occasionally  the  official  representatives  of  the 
city  turn  out  to  he  unduly  sympathetic  with  the  claims  of  the 
corporations  upon  whose  affairs  they  are  required  to  pass, 
while  on  the  other  hand  it  is  practically  an  unheard-of  thing 
for  the  official  representatives  of  a  company  to  betray  their 
employer’s  interests  on  account  of  a  secret  leaning  toward  the 
public’s  side  of  the  matters  in  dispute.  Moreover,  the  com¬ 
panies  enjoy  the  right  to  displace  their  representatives  at  will. 
It  would  he  better,  however,  to  have  the  third  arbitrator  ap¬ 
pointed  by  some  impartial  authority,  such  as  a  court  or  the 
governor  of  the  state  or  a  state  administrative  body. 


CHAPTER  Y. 


TEMPTATIONS  TO  PUBLIC  WRONG,  AND  WAYS  OF  OVER¬ 
COMING  THEM. 


82.  Activities  of  public  service  corpora¬ 

tions  that  run  counter  to  the  gen¬ 
eral  welfare. 

83.  Opposition  to  decency  and  public 

order. 

84.  Bribery  of  public  officials. 

85.  Free  service  to  public  officials. 

86.  Distribution  of  patronage  and  busi¬ 

ness  favors. 

87.  Interference  in  political  nominations 

and  elections. 

88.  Jury  fixing. 

89.  Influencing  the  judiciary. 

90.  Overcapitalization. 

91.  Looting  the  utility  through  financial 

jugglery. 

92.  Running  a  school  of  theft. 

93.  Destrojdng  the  safety,  comforts  and 

beauty  of  city  life. 


94.  Interest  in  opposing  improved  build¬ 

ing  regulations. 

95.  Competition  versus  monopoly  in 

public  utility  enterprises. 

96.  Monopoly  limited  by  indirect  com¬ 

petition. 

97.  Monopoly  strengthened  by  alliances. 

98.  Monopoly  advantages  limited  by  in¬ 

crease  in  cost  of  service. 

99.  Influence  of  the  junk  heap  on  mo¬ 

nopoly  advantages. 

100.  Advantages  of  monopoly  affected 

by  fluctuation  in  the  value  of 
money. 

101.  Fundamental  principles  generally 

agreed  upon. 

102.  The  elimination  of  special  fran¬ 

chise  values. 


82.  Activities  of  public  service  corporations  that  run 
counter  to  the  general  welfare. — “  Graft  is  treason,”  said 
Joseph  W.  Folk,  after  prosecuting  the  St.  Louis  boodle  cases. 
He  had  discovered  that  public  service  corporations  seeking 
franchises  in  a  great  city  and  aldermen  having  power  to  grant 
them  often  yield  to  the  temptation  to  conspire  together  as 
public  enemies  for  private  profit.  It  is  of  the  very  essence 
of  treason  to  permit  sordid  private  interests  to  outweigh  a 
citizen’s  loyalty  to  the  general  welfare  of  his  country. 

We  have  discussed  at  some  length  the  various  ways  in 
which  companies  holding  monopoly  franchises,  unless  care¬ 
fully  restrained,  may  inflict  injuries  upon  the  persons  or 
property  of  individuals.  We  have  also  suggested  certain  pro¬ 
visions  of  franchise  and  statute  by  which  these  injuries  may 
be  prevented  or  remedied.  It  now  remains  to  consider  the 
various  ways  in  which  persons  and  corporations  holding  fran¬ 
chises  are  likely  to  act  contrary  to  the  general  welfare  of 
the  community.  A  tragic  storv  might  be  written  of  the 

101 


102 


MUNICIPAL  FRANCHISES. 


temptations  of  public  service  corporations.  The  temptations 
of  Adam  and  Eve  were  nothing  as  compared  with  these. 
Organized  for  profit  and  thereby  adopting  the  ruling  passion 
of  a  sordid  age  as  the  sole  guiding  motive  of  their  activities, 
these  corporations  have  found  themselves  relieved  of  the  re¬ 
straints  of  conscience  and  personal  feeling  which  often  hold 
in  check  the  greed  of  individual  men.  Left  in  this  defenceless 
condition,  these  corporations  have  been  led  to  view  all  their 
relations  from  the  standpoint  of  those  who,  craving  money 
alone  are  keenly  alive  to  the  power  which  money  has  to  secure 
objects  not  to  be  had  through  persuasion  and  appeal  to  lofty 
motives.  Under  these  conditions,  it  is  hardly  surprising  that 
public  utility  corporations  have  come  to  be  regarded  as  one  of 
the  main  instruments  of  municipal  corruption  and  inefficiency. 
Upon  this  point  I  can  quote  no  higher  authority  than  Mr. 
Walter  L.  Eisher,  of  Chicago.  He  says: 1 

“  The  attempt  to  control  and  regulate  street  railways,  gas,  electric 
light  and  telephone  companies  has,  on  the  whole,  been  unsuccessful, 
because  of  the  powerful  special  interests  which  have  either  controlled 
or  strongly  influenced  the  governing  party  in  power  in  the  community. 
The  chief  sources  of  corruption  in  American  cities  are  necessarily 
public  contracts,  and  the  granting  of  special  privileges  or  exemptions. 
As  a  matter  of  fact  the  latter  has  been  the  most  important  contributory 
cause.  There  have  been  many  and  great  abuses  in  connection  with 
public  contracts,  but  the  most  serious  scandals  have  almost  always  been 
connected  with,  or  centered  around  special  privileges,  and  chiefly  public 
utilities.  Those  who  seek  special  privileges  have  been  most  likely  to 
offer  illegal  inducements  to  the  public  official  who  has  power  to  grant 
these  privileges.  They  have  been  the  most  obvious  and  alluring  victims 
of  the  predatory  ‘  grafter.  ’  They  create  and  maintain  a  continuing  lobby 
— always  defensive  and  frequently  offensive — because  they  have  a  con¬ 
stant  incentive  through  their  necessary  relations  with  the  public 
authorities.  A  contract  or  the  securing  of  a  contract  on  unfair  terms 
invites  occasional  corruption;  a  franchise  usually  involves  the  con¬ 
tinuous  maintenance  of  a  ‘  sphere  of  influence  ’  in  the  city  government. 

“  Not  only  is  this  true,  but  the  corruption  of  city  government  for  the 
purpose  of  obtaining  valuable  special  privileges  at  little  cost  has  had 
the  effect  of  demoralizing  municipal  government  for  other  purposes. 
Public  officials  who  can  be  relied  upon  by  special  interests  to  give  away 
franchises  or  other  privileges,  cannot  be  relied  upon  by  the  people  to 
provide  an  effective  and  honest  police  force,  or  high  grade  street 
paving,  or  adequate  street  cleaning,  or  any  other  elementary  function 
of  city  government.  On  the  other  hand,  aldermen  and  city  officials 
who  can  be  relied  upon  to  furnish  strong  and  energetic  administration 
of  public  affairs,  cannot  be  relied  upon  by  the  corporations  or  indi¬ 
viduals  concerned  to  grant  special  privileges  upon  terms  unduly  favor- 

1  “  The  American  Municipality published  as  a  part  of  the  Report  of  the  Na¬ 
tional  Civic  Federation  Commission  on  Public  Ownership  and  Operation,  Part  I, 
Volume  I,  p.  38. 


TEMPTATIONS  TO  PUBLIC  WRONG. 


103 


able  to  them.  Since  it  is  practically  impossible  to  isolate  the  different 
departments  of  city  government,  the  contamination  of  one  has  tended 
to  affect  all  the  others.  In  any  study,  therefore,  of  the  relations  be¬ 
tween  the  American  city  and  the  public  utility  corporations,  it  must  be 
borne  in  mind  that  one  of  the  reasons  for  the  weakness  of  American 
city  governments  has  been  the  very  action  of  these  very  special  privi¬ 
lege  interests  themselves.” 

With  these  words  ringing  in  our  ears,  we  may  proceed  to 
take  up  in  some  detail  the  various  evil  tendencies  of  fran¬ 
chise-holding  companies,  and  ways  in  which  these  tendencies 
may  be  checked,  so  far  as  the  remedies  are  germane  to  a 
discussion  of  municipal  franchises. 

83.  Opposition  to  decency  and  public  order — Mr.  Fisher 
names  public  contracts  and  public  franchises  as  the  two 
principal  sources  of  municipal  corruption  in  this  country. 
In  a  somewhat  different  way,  working  through  the  police, 
the  prosecuting  machinery  and  the  local  courts,  the  organized 
liquor  interest  in  connection  with  organized  gambling  and 
vice  has  been  an  equally  important  factor  in  the  corruption 
of  American  cities.  At  any  rate,  the  hiatus  existing  between 
the  laws  on  the  statute  book  regulating  the  sale  of  liquor  and 
prohibiting  vice  and  gambling  on  the  one  side,  and  the  actual 
manner  in  which  these  interests  have  been  treated  by  the 
public  authorities  charged  with  the  enforcement  of  law  has 
been  an  open  door  to  corruption  and  disrespect  for  law  and 
order.  Indeed,  the  question  of  the  u  open  town  ”  has  more 
often  than  any  other  been  recognized  as  the  dominant  issue 
in  municipal  politics  in  America.  Without  attempting  to 
decide  here  whether  or  not  the  laws  and  ordinances  whose 
enforcement  has  been  so  bitterly  resisted  are  wise  regulations, 
we  may  at  least  affirm  that  their  presence  on  the  statute- 
book  attended  by  their  non-enforcement  has  been  a  calamity 
of  the  first  magnitude.  On  this  issue  of  law-enforcement,  it 
is  frequently  observed  that  many  large  business  interests  in 
a  city  lend  their  influence  more  or  less  directly  in  favor  of  a 
so-called  “  liberal  ”  policy,  otherwise  designated  as  the  policy 
of  the  “  open  town.”  It  seems  to  be  the  feeling  of  these 
business  interests  that  a  strict  enforcement  of  the  laws  closing 
saloons  at  11  p.  M.  or  midnight  and  all  day  on  Sundays, 
holidays  and  election  days,  and  a  consistent  effort  to 
stamp  out  gambling  and  organized  vice,  tend  to  “  hurt 
business.”  The  members  of  the  sporting  fraternity  are 


104 


MUNICIPAL  FRANCHISES. 


recognized  as  good  spenders,  and  what  business  men  desire, 
of  all  things,  is  a  city  full  of  people  who  are  free  with  their 
money.  Then  it  has  been  argued  by  the  business  interests 
that  excursions  do  not  come  as  readily  to  a  puritanic  city  as 
to  one  where  “  high  jinks  ”  are  being  performed  all  night 
and  all  day,  seven  days  in  the  week  and  twelve  months  in 
the  year.  There  is  no  doubt  that  on  many  occasions  in 
many  cities  the  “  open  town  ”  policy  has  developed  into  a 
scandal  and  a  disgrace,  corrupting  to  citizenship  and  to 
officialdom  alike. 

The  public  utility  corporations  are  everywhere  influential 
factors  in  the  business  world  and  especially  influential 
in  politics  because  of  the  close  relations  they  bear  to  the  pub¬ 
lic  authorities  through  the  operation  of  franchises  in  the 
streets.  For  certain  financial  reasons  some  of  these  corpora¬ 
tor  are  frequently  found  to  be  in  sympathy  with  the  “  wide 
open  ”  policy.  A  street  railway  has  to  be  operated  seven  days 
in  the  week  and  in  the  larger  cities  all  night  long.  The 
profits  of  the  enterprise  depend  largely  on  the  stimulation  of 
traffic  at  odd  hours.  A  crowd  of  people  in  town  of  a  Sun¬ 
day  means  profit  to  the  street  railway.  A  bunch  of  revellers 
going  home  in  the  wee  small  hours  makes  the  “  owl  ”  cars 
profitable.  A  resort  on  the  outskirts  of  the  city  where  people 
go  in  throngs  evenings,  Saturday  afternoons  and  Sundays  is 
a  wonderful  asset  for  the  railway.  Gas  and  electric  com¬ 
panies  also  find  that  saloons  and  public  resorts,  open  all 
night,  consume  a  great  deal  of  light  at  those  hours  when  few 
other  places  want  any  light  and  consequently  the  service  can 
be  rendered  cheaply.  There  is  no  way  in  which  the  com¬ 
panies  can  be  directly  prevented  from  throwing  their  political 
and  business  influence  in  favor  of  the  policy  which  they  may 
deem  most  profitable  to  them.  It  is  possible,  however,  to 
curtail  the  temptations  of  street  railway  companies  by  a 
franchise  provision  stipulating  that  they  shall  not  have  any 
interest  directly  or  indirectly  in  the  establishment  or  main¬ 
tenance  of  amusement  resorts.  Such  a  provision  could  prob¬ 
ably  be  made  reasonably  effective  with  full  publicity  of  cor¬ 
poration  accounts.  The  companies  may  exert  their  influence 
in  favor  of  a  general  e<  liberal  ”  policy  by  contributing  to  the 
campaign  funds  of  “  liberal  ”  candidates  and  by  bringing 
pressure  to  bear  on  employees  to  support  such  candidates. 


TEMPTATIONS  TO  PUBLIC  WRONG. 


105 


Where  the  old  caucus  and  convention  system  is  still  in  vogue 
the  companies  may  influence  nominations  by  the  devious 
ways  so  often  pursued  in  such  matters.  Furthermore, 
through  their  financial  connections  the  companies  may  bring 
great  influence  to  bear  in  shaping  the  policies  of  newspapers 
and  business  organizations.  How  to  prevent  such  activities 
will  be  discussed  in  later  paragraphs. 

84.  Bribery  of  public  officials. — The  extent  to  which  pub¬ 
lic  service  corporations  have  debauched  officials  and  deadened 
the  public  conscience  by  means  of  direct  bribery  will  never 
be  known.  This  is  a  secret  offence  and  both  parties  to  it  are 
guilty  of  a  crime.  They  keep  still  about  it  except  under 
extraordinary  circumstances.  But  the  actual  confessions  and 
convictions  of  bribers  in  New  York,  St.  Louis,  San  Francisco, 
Grand  Bapids  and  other  places,  and  the  knowledge  that  sim¬ 
ilar  conditions  have  apparently  prevailed  at  one  time  or  an¬ 
other  in  practically  all  large  American  cities,  have  satisfied 
the  public  that  direct  bribery  in  connection  with  franchise- 
grants  has  been  in  many  localities  at  many  times  an  established 
policy  of  public  service  corporations.  The  story  of  the 
Broadway  franchise  scandal  in  New  York  City  twenty-five 
years  ago  and  the  decision  of  the  New  York  Court  of  Appeals 
to  the  effect  that  the  franchise  secured  by  the  wholesale  pur¬ 
chase  of  aldermen  could  not  be  abrogated  by  the  legislature, 
but  remained  a  valid  grant  even  after  the  dissolution  of  the 
company  that  secured  it,  still  remains  a  conspicuous  mile¬ 
post  in  the  shocking  annals  of  corporate  corruption  and 
judicial  acquiescence.  The  mind  cannot  be  reconciled  to  it. 
It  is  unnecessary  to  dwell  further  upon  the  extent  of  bribery 
or  its  poisonous  effects  upon  the  body  politic.  “  Graft  is 
treason ”  expresses  the  dreadful  character  of  the  crime. 

How  can  bribery  be  prevented  ?  Indeed,  if  bribery  is  at 
work  among  the  aldermen,  there  is  no  need  of  discussing 
what  clauses  may  be  inserted  in  the  franchise  to  prevent  brib- 
erjr.  An  alderman  with  his  “  price  ”  in  his  pocket  and  the 
guilt  on  his  soul  will  not  be  likely  to  take  any  interest  in  sug¬ 
gestions  as  to  how  he  may  protect  the  interests  of  the  city  he 
has  already  betrayed.  But  it  often  happens  that  some  honest 
men  vote  for  a  franchise  which  is  passed  with  the  help  of  pur¬ 
chased  votes.  In  any  franchise  there  can  be  inserted  a  clause 
to  which  honest  men  do  not  desire  to  object,  and  which 


106 


MUNICIPAL  FRANCHISES. 


rogues  dare  not  openly  oppose.  I  refer  to  a  clause  providing 
that  the  franchise  shall  be  forfeited  in  case  bribery  is  ever 
proven  in  connection  with  its  passage  or  in  connection  with 
operation  under  it.  Such  a  clause  in  a  franchise  or  still  bet¬ 
ter  such  a  provision  in  the  general  law  concerning  the  grant 
of  franchises  would  help  to  undo  the  evil  done  by  the  Yew 
York  Court  of  Appeals  in  the  Broadway  case  and  would  take 
away  the  strongest  motive  for  the  purchase  of  votes  in  con¬ 
nection  with  a  franchise  grant. 

Another  plan  tending  to  eliminate  bribery  by  making  it 
ineffectual  is  the  inclusion  in  each  franchise  or  in  the  general 
law  relating  to  franchise-grants,  of  a  clause  reserving  to  the 
electors  the  right  to  pass  upon  the  grant,  either  absolutely  or 
on  condition  that  a  certain  number  of  citizens  petition  to 
have  the  measure  submitted  to  popular  vote. 

Another  means  of  preventing  bribery  is  the  insertion  of  a 
clause  in  the  franchise  providing  for  complete  publicity  of 
the  grantee’s  accounts.  If  this  provision  is  sufficiently  com¬ 
prehensive,  corrupt  expenditures  can  at  least  be  traced  to  the 
point  of  suspicion. 

As  a  matter  of  general  policy  to  be  embodied  in  the  general 
law,  not  in  the  franchise,  it  might  even  be  a  good  thing  to 
grant  immunity  or  a  minimum  punishment  to  either  party 
who  “  informed  ”  on  the  other.  Such  a  law  would  tend  to 
divide  the  interests  of  the  two  parties  to  the  crime  and  make 
them  suspicious  of  each  other  and  afraid  to  consummate  the 
transaction. 

85.  Free  service  to  public  officials — Many  public  officials 
whose  standards  of  ethics  would  cause  them  to  repel  with 
indignation  any  attempt  on  the  part  of  a  public  service  cor¬ 
poration  to  bribe  them  directly,  are  eager  to  accept  free 
services  from  these  same  companies.  Such  officials  usually 
resent  the  inference  on  the  part  of  their  constituents  that 
such  little  tilings  as  free  passes  on  railroads  and  street  cars, 
and  telephone  franks  might  have  an  influence  upon  their 
official  action.  Contrasting  the  “  ungenerous  ”  criticisms  of 
the  voters  with  the  kindness  and  deference  shown  by  the 
companies,  these  officials  find  themselves  gradually  becoming 
cynical  about  the  interests  of  the  “  dear  people  ”  and  more 
and  more  friendly  to  the  honorable  and  sensible  men  who 
treat  them  like  gentlemen  by  giving  them  free  rides  and 


TEMPTATIONS  TO  PUBLIC  WRONG.  107 

letting  them  partake  of  the  blessings  of  other  public  utilities 
without  cost.  Most  men  endeavor  to  justify  their  actions. 
So  an  alderman  argues  that  he  is  required  to  travel  around  a 
great  deal  on  public  business  and  that  as  long  as  the  city  does¬ 
n’t  pay  his  car  fare  it  is  all  right  for  the  company  to  give  him 
free  transportation  as  a  partial  compensation  in  an  indirect 
way  for  the  privilege  of  using  the  streets.  This  feeling  be¬ 
comes  so  strong  at  times  that  a  legal  provision  compelling  pub¬ 
lic  service  corporations,  particularly  transportation  companies, 
to  serve  public  officials  free,  is  advocated.  After  the  people  of 
Oregon  passed  an  act  under  the  Initiative  prohibiting  the  giv¬ 
ing  of  franks  and  free  passes  to  officials,  the  Legislature  of  that 
state  passed  a  law  requiring  the  railroad  companies  to  carry 
public  officials  free.  This  act  was  vetoed  by  the  people  under  the 
Referendum.  In  cities  it  is  frequently  the  established  rule  of 
law  or  well  recognized  custom  that  policemen  and  firemen  in 
uniform  shall  be  carried  on  the  street  cars  free.  On  the  whole, 
it  is  better  to  make  everybody  pay  for  the  rides  he  takes,  unless 
tickets  are  purchased  by  the  city  and  furnished  to  its  officials 
for  necessary  use  in  connection  with  public  business.  This  much 
is  certain,  free  services  as  special  favors  to  be  granted  or  with¬ 
held  at  the  pleasure  of  the  franchise  holding  company  should 
be  ruled  out.  The  subtle  influence  of  little  favors  is  often  irre¬ 
sistible.  It  is  a  law  of  human  nature  for  a  person  to  like  those 
who  are  “  good  ”  to  him.  When  Rudolph  Spreckels  went  on  the 
board  of  directors  of  a  San  Francisco  gas  company  he  found 
that  it  had  been  following  the  cowardly  policy  of  remitting 
or  never  attempting  to  collect  the  accounts  charged  on  its 
books  against  influential  politicians.  That  such  a  policy  was 
unnecessary  and  short-sighted  he  soon  demonstrated,  but  in 
order  to  get  it  changed  effectively  he  had  to  appeal  to  the 
stockholders  and  with  their  assistance  get  a  new  board  of 
directors.  Thorough  publicity  of  accounts  will  help  clear 
out  the  dark  corners  and  will  help  to  bring  favoritism  to  an 
end.  An  effective  method  of  correcting  or  preventing  many 
abuses,  including  this  one,  is  the  insertion  of  a  clause  in  the 
franchise  providing  for  its  forfeiture  upon  proof  that  the 
practice  of  which  we  are  speaking  has  been  followed.  There 
should  be  no  hesitation  about  adopting  whatever  measures 
may  be  necessary  to  protect  the  public  life  of  the  city  from 
the  peculiarly  subtle  poisoning  that  results  from  this  indirect 


108 


MUNICIPAL  FRANCHISES. 


bribery  which  in  many  cases  appears  to  be  little  more  than 
the  cultivation  of  friendly  relations.  Free  services  to  officials 
should  either  be  required  or  be  prohibited. 

86.  Distribution  of  patronage  and  business  favors- — A 
public  service  company  is  usually  one  of  the  great  business 
institutions  of  the  city  where  it  operates  franchises.  In  1907 
the  United  States  Census  Bureau  found  the  average  number 
of  paid  officers  and  employees  of  street  and  electric  railways 
in  this  country  to  be  over  221,000  and  their  salaries  and 
wages  for  the  year  in  excess  of  $151,000,000.1  A  comparison 
of  the  activities  of  the  Detroit  United  Bailway  and  the  City 
of  Detrpit  made  a  few  years  ago  showed  the  two  corporations 
to  be  of  very  nearly  equal  importance  as  measured  by  the 
magnitude  of  their  operations.  Indeed,  so  far  as  capitaliza¬ 
tion  is  concerned  the  Detroit  United  Railway  could  show 
stocks  and  bonds  outstanding  aggregating  about  six  times  the 
par  value  of  the  city  debt.  A  general  comparison  of  the 
corporate  activities  of  cities  and  of  the  public  utility  com¬ 
panies  operating  in  their  streets  would  doubtless  show  the 
latter  to  be  fully  as  important  as  the  former  in  respect  to 
number  of  employees,  amount  of  stocks  and  bonds  outstand¬ 
ing,  gross  earnings,  corporate  assets,  etc.  Moreover,  in  the 
gift  of  offices  and  jobs  the  companies  are  not  usually 
“  hampered  ”  by  civil  service  regulations,  publicity  of  accounts 
or  the  necessity  of  winning  the  people’s  votes,  and  the  salaries 
and  wages  paid  are  not  fixed  by  statute.  Moreover  the  com¬ 
panies  do  not  have  to  award  their  construction  contracts  to 
the  lowest  bidder  after  public  advertisement.  As  a  natural 
consequence  of  these  conditions,  delectable  from  the  stand¬ 
point  of  the  farmers  of  patronage,  public  officials  who  have 
a  bent  that  way  are  not  slow  to  reach  out  for  the  control 
of  contracts  and  appointments  to  positions  of  profit  under  the 
corporations.  Indeed,  a  company  desiring  a  renewal  of  its 
franchises  on  favorable  terms  or  desiring  easy  standing  rela¬ 
tions  with  the  city  government  whose  consent  it  must  secure 
from  time  to  time  for  its  various  undertakings,  has  no  more 
powerful  leverage  upon  the  politicians  in  control  of  the  city’s 
destiny  than  its  opportunity  to  favor  them  with  patronage 
and  contracts.  Sometimes  the  companies  go  to  the  extent  of 

1  Preliminary  Report  on  Street  and  Electric  Railways,  Bureau  of  the  Census 
'  released  Jan.  18,  1909. 


TEMPTATIONS  TO  PUBLIC  WRONG. 


109 


placing  aldermen  themselves  on  their  pay-rolls  or  giving  them 
contracts  directly,  or  of  helping  to  elect  as  aldermen  men 
who  are  already  employed  by  them  or  under  obligations  to 
them.  There  are  an  infinite  number  of  ways  in  which  a 
powerful  public  service  corporation  can  reach  public  officials 
with  rewards  or  punishments  for  their  official  acts.  Through 
the  control  of  a  bank,  a  company  may  extend  a  loan  to  a  needy 
alderman  who  is  friendly  or  foreclose  a  mortgage  on  the  home 
of  an  alderman  who  is  unfriendly.  There  is  nothing  in  the 
conditions  of  public  life  to-day  so  terrible  as  this  power  of 
corporations  existing  by  favor  of  the  city  to  debauch  the 
character  of  the  public  servants  by  subtle,  multiform  and 
almost  irresistible  business  pressure.  It  is  true,  to  be  sure, 
that  a  company  which  on  its  own  motion  or  in  response  to  the 
demands  of  politicians,  turns  its  business  over  to  the  spoils¬ 
men  in  any  considerable  measure,  invites  disaster  and  will 
probably  be  wrecked  in  the  long  run  by  the  partnership  it 
enters  into.  Both  the  debauchery  of  the  official  service  and 
the  wrecking  of  the  utilities  are  disasters  of  great  magnitude 
from  the  standpoint  of  the  public  welfare.  What  can  be 
done  in  franchise-grant  or  regulatory  statute  to  prevent  or 
correct  these  insidious  evils?  Publicity  of  accounts,  the  ex¬ 
tension  of  civil  service  regulations  to  public  utility  employees 
and  the  requirement  of  the  approval  of  construction  contracts 
by  the  proper  municipal  authorities  will  help.  The  evils 
growing  out  of  the  relations  between  the  companies  and 
the  public  authorities  are  aggravated,  where  they  are  not 
caused,  by  secret  and  devious  methods.  “  Bring  everything 
into  the  light  ”,  should  be  the  first  principle  of  franchise¬ 
drafting.  It  might  be  desirable  to  go  so  far  as  to  stipulate 
that  a  company’s  franchise  will  be  forfeited  if  it  employs  or 
has  special  contractual  relations  with  any  public  official.  It 
is  difficult  to  prevent  by  direct  prohibition  the  sharing  of 
patronage  and  yet  a  clause  might  be  inserted  in  the  franchise 
providing  for  its  forfeiture  or  for  a  heavy  fine  in  case  it 
is  proven  that  the  company  has  appointed,  promoted  or  dis¬ 
charged  any  officer  or  employee  at  the  personal  solicitation 
of  a  public  official. 

87.  Interference  in  political  nominations  and  elections. — 

The  power  of  public  service  corporations  over  the  official 
acts  of  public  servants  is  often  secured  neither  by  direct 


110 


MUNICIPAL  FRANCHISES. 


bribery  nor  by  patronage  and  business  favors  given  directly. 
The  companies  may  attain  their  ends  by  using  as  an  inter¬ 
mediary  the  political  boss  and  the  party  organization.  Where 
conditions  are  such  that  a  United  States  Senator,  a  collector 
of  the  port,  a  chairman  of  the  city  committee,  a  leader  of 
some  Tammany  Hall  organization,  or  just  a  plain  private 
citizen,  possibly  even  a  blind  one,  can  dictate  nominations 
and  deliver  the  votes  of  legislatures  and  aldermen,  a  company 
that  desires  to  get  on  smoothly  in  the  path  of  exploitation 
naturally  goes  to  him  and  contributes  its  mite  to  the  perpetua¬ 
tion  of  his  power.  What  he  needs  is  money  and  to  be  let 
alone.  A  liberal  contribution  to  the  party  campaign  fund 
may  satisfy  him.  Or  he  may  require  that  the  criticisms  of 
the  newspapers  over  which  the  company  has  influence  shall 
be  stopped,  or  that  money  be  loaned  to  his  private  enterprises 
by  the  company’s  bank.  In  the  use  of  political  machinery  for 
the  furtherance  of  their  ends  the  companies  are  nonpartisan. 
They  may  find,  as  suggested  by  that  celebrated  expert,  Mr. 
Thomas  F.  Ryan,  that  it  will  be  to  their  advantage  to  have 
Republican  principles  prevail  in  the  state  and  Democratic 
principles  prevail  in  the  city  at  the  same  time.  They  may 
even  find  it  to  their  advantage  to  have  a  Republican  alderman 
elected  from  one  ward  and  a  Democratic  alderman  from 
another.  Indeed,  it  is  often  apparent  after  the  nominations 
have  been  attended  to,  that  a  company’s  only  reason  for 
regret  is  the  impossibility  of  having  the  candidates  of  both 
parties  elected  in  the  same  districts.  This  relation  of  the 
companies  to  the  boss  system  and  party  machinery  is  one  of 
the  very  cornerstones  of  the  system  of  corruption  that  has 
disgraced  American  cities.  To  break  it  up  entirely  the 
cooperation  of  the  election  law  and  the  criminal  law  with 
wise  franchise  provisions  is  required.  From  the  franchise 
standpoint,  publicity  of  accounts  stands  out  again  as  a  most 
efficacious  remedy  for  the  evil.  Here  also  the  penalty  of 
forfeiture  of  its  franchise  should  attach  to  political  campaign 
contributions  on  the  part  of  a  public  service  company.  It 
might  also  help,  if  it  were  stipulated  in  the  contract  with  the 
city  that  the  company  should  not  permit  its  officers  or 
employees  to  qualify  as  delegates  to  conventions  for  the 
nomination  of  aldermen  or  other  public  officials  who  will 
naturally  be  required  in  the  performance  of  their  official 


TEMPTATIONS  TO  PUBLIC  WRONG.  m 

duties  to  pass  upon  franchises  or  other  matters  involving  the 
special  interests  and  privileges  of  the  company. 

88.  Jury  fixing. — Street  railway  companies  have  to  de¬ 
fend  a  great  many  damage  suits.  The  killing  and  maiming 
of  people  is  an  incident  of  street  railway  operation.  In 
crowded  streets,  which  serve  as  the  children’s  only  play¬ 
grounds,  and  at  congested  crossings,  accidents  are  compara¬ 
tively  numerous.  There  is  undoubtedly  a  general  feeling 
among  the  people  that  the  company  is  a  rich  robber  and  that 
it  should  be  compelled  to  pay  for  injuries  even  though  they 
may  have  been  due  solely  or  principally  to  the  carelessness  of 
the  persons  injured.  It  is  indeed  pitiful  that  mere  children 
must  always  be  careful  when  they  step  out  of  their  homes,  or 
run  great  risk  of  being  killed.  But  whatever  the  merits  of 
the  case  may  be,  the  fact  remains  that  one  of  the  chief 
burdens  of  a  street  railway  company  is  the  payment  of  claims 
for  injuries  or  the  expense  and  trouble  of  getting  out  of  the 
necessity  of  paying  them.  There  is  no  doubt  a  horde  of 
unscrupulous  lawyers  who  work  up  flimsy  cases  on  a  percent¬ 
age  basis.  Doubtless  it  is  the  difficulty  and  expense  of  meet¬ 
ing  this  situation,  which  is  rendered  worse  by  the  prejudices 
of  the  average  juror,  that  induces  companies  to  resort  to  the 
desperate  practice  of  “  jury-fixing  ”,  There  can  be  no  worse 
crime  against  political  society  than  this  and  its  comparative 
frequency  has  been  an  important  factor  in  the  break-down 
of  the  jury  system  and  in  the  development  of  the  passionate 
hatred  against  the  companies  shared  especially  by  the  poorer 
classes.  There  are  several  ways  in  which  this  dastardly 
practice  can  be  made  dangerous  and  futile.  From  the  law 
side  conditions  will  improve  with  better  regulations  govern¬ 
ing  the  selection  of  jurors  and  talesmen.  From  the  franchise 
side,  the  forfeiture  clause  and  the  requirement  of  publicity 
of  accounts  can  accomplish  a  great  deal.  Let  every  franchise 
become  void,  if  the  company  holding  it  is  convicted  of  tamper¬ 
ing  with  a  jury.  One  of  the  last  points  to  be  yielded  from 
the  company  standpoint  in  regard  to  publicity  of  accounts 
is  publicity  of  expenditures  to  satisfy  damage  claims.  This 
is  so  because  the  lawyers  for  the  company  attempt  to  settle 
out  of  court  every  case  where  they  can  induce  the  claimant  to 
take  less  than  they  think  he  would  be  likely  to  get  if  the 
question  were  put  to  a  jury.  By  taking  advantage  of  the 


112 


MUNICIPAL  FRANCHISES. 


ignorance,  timidity  and  need  of  each  claimant  individually 
they  are  able  to  save  their  client  large  sums  of  money  by  this 
process  of  secret  dickering.  In  a  particularly  bad  case  with 
an  intelligent  and  stubborn  claimant,  the  company  may  be 
willing  to  pay  a  large  sum  to  keep  the  matter  out  of  court. 
If  all  these  facts  were  made  known  through  a  detailed  public 
audit  of  accounts,  the  backbones  of  the  weaker  and  more 
necessitous  claimants  would  be  stiffened,  and  the  company 
would  find  it  harder  to  settle  with  them.  This  cruel  method 
of  adjusting  awards  for  injuries  inflicted  in  the  performance 
of  a  public  service  in  the  public  streets  is  so  monstrous  that 
instead  of  weakening  the  argument  for  publicity  it  strengthens 
it  immeasurably.  If  the  public  authorities  have  the 
guaranteed  opportunity  to  trace  the  expenditures  of  the  com¬ 
pany  to  the  last  penny,  there  will  be  comparatively  little 
danger  of  money  being  spent  to  bribe  jurors  or  silence  wit¬ 
nesses.  Another  desirable  franchise  requirement  is  that  the 
company  shall,  upon  the  occurrence  of  any  accident  in  con¬ 
nection  with  its  operations,  immediately  report  the  matter  to 
some  designated  public  official  authorized  to  investigate  such 
matters.  An  even  more  effective  means  of  preventing 
interference  with  juries  as  well  as  the  injustice  of  present 
methods  of  settling  cases  out  of  court  would  be  the  establish¬ 
ment  of  a  special  court  of  arbitration  to  which  should  be 
referred  the  question  of  responsibility  for  accidents  and  the 
determination  of  the  amount  of  damages  to  be  paid  to 
individuals  by  the  companies.  The  officer  to  whom  accidents 
are  reported  should  be  required  to  report  the  result  of  his 
investigations  to  this  court,  and  no  private  settlement  of 
claims  should  be  permitted  even  with  the  consent  of  the 
claimants.  Every  award  should  be  fixed  by  this  court  or  be 
subject  to  its  approval.  Appeals  from  its  decision  might  be 
permitted  under  strict  limitations,  but  in  cases  of  appeal  by 
the  company  the  public  lawyers  should  be  charged  with  hand¬ 
ling  the  case  in  the  higher  courts  without  expense  to  the 
claimant. 

89.  Influencing  the  judiciary — It  is  coming  to  be  well 

understood  that  the  judiciary  is  the  chief  bulwark  of  large 
property  interests  in  America  and  that  the  legal  profession, 
from  which  the  judiciary  is  recruited,  is  primarily  engaged 
in  the  defense  of  property  for  pay,  and  that  the  ablest  mem- 


TEMPTATIONS  TO  PUBLIC  WRONG. 


113 


bers  of  the  profession  are  engaged  in  the  defense  of  the 
largest  properties,  which,  naturally,  can  pay  most.  Public 
utilities  represent  great  concentrated  masses  of  property  and 
privileges,  which  are,  at  the  same  time,  in  the  class  of 
interests  which  are  most  open  to  attack  and  accordingly 
are  most  in  need  of  defense.  Accordingly,  a  public  service 
corporation’s  first  move  is  to  retain  influential  attorneys 
practising  in  the  community  in  which  it  proposes  to  operate. 
Then  after  operation  has  commenced  and  damage  claims, 
franchise  litigation  and  restrictive  legislation  of  various  kinds 
develop,  the  company  organizes  a  regular  “  army  of  defense  ” 
composed  of  lawyers  who  are  willing  to  brave  the  public 
wrath  and  resist  the  onslaughts  of  public  officials  without 
flinching.  At  critical  periods  in  their  affairs  the  companies 
aim  by  special  retainers  to  enlist  the  active  cooperation  or  at 
least  the  silence  of  certain  “  bright,  particular  stars  ”  in 
the  profession,  whose  employment  by  the  city  or  active 
leadership  in  popular  movements  would  be  likely  to  be  effec¬ 
tive  as  against  the  interests  of  the  companies.  It  is  in  ac¬ 
cordance  with  the  “  ethics  ”  of  his  profession  that  a  lawyer’s 
mouth  may  be  honorably  opened  or  shut  by  a  fee.  With 
these  facts  in  mind,  we  can  readily  see  how  the  companies 
may  have  extraordinary  success  in  influencing  the  courts. 
The  stakes  are  often  very  great.  It  may  be  a  question  of  the 
validity  of  franchises  or  of  their  interpretation,  or  it  may  be  a 
regulation  of  rates  or  service  that  is  involved  in  the  litiga¬ 
tion.  A  decision  on  the  meaning  of  a  few  words  in  franchise 
or  statute  may  involve  millions  of  dollars  one  way  or  the 
other  to  the  companies.  Under  the  Fourteenth  Amendment 
any  of  this  litigation  involving  property  rights  may  be  trans¬ 
ferred  from  the  state  to  the  Federal  courts.  It  is  accord¬ 
ingly  to  the  interest  of  the  companies  that  the  judges  in 
municipal,  state  and  Federal  jurisdictions,  especially  the  last, 
should  be  friendly  to  corporate  interests.  One  of  the  most 
generally  effective  ways  of  influencing  judges  is  simply 
through  the  methods  already  described  of  dealing  with  the 
legal  profession.  By  training  the  ablest  lawyers  in  corpora¬ 
tion  habits  of  thought  and  then  seeing  that  only  such  men  are 
nominated  for  judicial  positions  or  appointed  to  them,  the 
companies1  fortify  themselves  in  a  most  effective  way.  Fur¬ 
thermore  a  judge  who  has  any  expectation  of  ever  returning 


114 


MUNICIPAL  FRANCHISES. 


to  private  practice  understands  perfectly  well  that  fat  fees 
lie  in  the  direction  of  friendly  relations  with  great  property- 
interests.  In  some  cases  judges  may  even  be  induced  to  be¬ 
come  stockholders  in  public  service  corporations,  perhaps  not 
in  the  particular  ones  upon  whose  affairs  they  must  pass,  but 
in  others  whose  interests  are  practically  identical.  An  offen¬ 
sive  and  defensive  alliance  between  the  companies  and  such 
political  forces  as  the  Euef  organization  in  San  Francisco, 
Tammany  Flail  in  New  York  City,  and  the  dominating 
machines  in  Denver,  Cincinnati,  Philadelphia  and  other  cities, 
great  and  small,  enables  the  companies  to  name  the  local 
judges  in  advance,  and  through  the  Senatorial  system  of 
appointments  to  dictate  on  many  occasions  who  shall  be 
judges  in  the  lower  Federal  courts.  The  possession  by  the 
companies  of  this  extraordinary  leverage  on  the  judiciary 
makes  it  doubly  important  that  franchises  should  be  clear  and 
unmistakable  in  their  provisions  and  that  the  door  to  litiga¬ 
tion  should  be  shut  as  tightly  as  possible.  The  power  to 
influence  judges  can  be  curtailed  only  indirectly  by  specific 
franchise  provisions.  While  by  general  laws,  judges  might 
be  forbidden  to  hold  stock  in  any  public  utility  corporation 
or  to  accept  retainers  from  such  a  company  within  a  certain 
fixed  period  after  they  have  left  the  bench,  and  lawyers 
might  be  made  ineligible  to  judgeships  for  a  fixed  period 
after  quitting  the  employment  of  public  utility  companies, 
about  all  that  can  be  done  along  these  lines  in  a  franchise 
grant  is  to  require  publicity  of  the  names  of  all  stockholders 
and  of  the  names  and  salaries  or  fees  of  all  counsel  employed. 
The  elimination  of  campaign  contributions  directly  by 
statutory  prohibition  or  indirectly  by  publicity  of  all  ex¬ 
penditures  would  strike  a  serious  blow  at  the  alliance  with 
political  organizations,  which  select  judges. 

90.  Overcapitalization. —  Of  all  the  policies  followed  by 
public  service  corporations  contrary  to  the  general  public  in¬ 
terests,  there  is  none  that  has  been  more  generally  condemned 
than  the  policy  of  overcapitalization.  This  evil  is  to  a  very 
great  extent  the  outgrowth  of  the  monopoly  principle  coupled 
with  inadequate  public  supervision.  The  capital  stock  of  a 
company  frequently  represents  only  the  promoter’s  reward 
or  the  bondholder’s  bonus,  and  represents  no  actual  invest¬ 
ment  of  money.  Many  stocks  which  have  never  paid  a 


TEMPTATIONS  TO  PUBLIC  WRONG. 


115 


dividend  and  have  no  immediate  prospect  of  doing  so,  still 
have  a  considerable  market  value  based  either  on  the  hopes  of 
the  future  or  on  their  value  as  carrying  the  control  of  the 
operation  of  great  properties  that  are  ultimately  owned  by 
the  bondholders.  ,  Indeed,  the  “  water  ”  in  a  company’s  se¬ 
curities  is  not  always  confined  to  its  capital  stock,  as  even  the 
bonds  issued  by  it  sometimes  represent  in  part  the  profits 
of  manipulators  rather  than  actual  investments  in  the  plant. 
It  is  well  known  that  mergers  and  consolidations  of  formerly 
competing  companies  have  been  attended  in  many  instances 
by  an  inflation  of  capital  representing  the  proposed  advan¬ 
tages  of  the  merger.  The  capitalization  of  franchises  and 
other  intangible  “  property  ”,  so-called,  has  frequently  been 
carried  to  grotesque  extremes.  The  first  result  has  been  the 
unloading  on  the  public  of  a  great  mass  of  securities  with 
nothing  substantial  behind  them,  with  immense  profit  to  the 
insiders,  but  with  no  advantage  to  the  business  being  done 
under  the  franchise.  By  getting  these  securities  scattered 
about  among  “  innocent  investors  ”,  the  original  promoters 
of  the  company  give  color  of  truth  to  the  claim  that  the 
owners  of  the  property  have  put  a  great  amount  of  money 
into  it  and  that  the  “  widows  and  orphans  ”  who  depend  on 
the  dividends  paid  cannot  with  justice  have  the  value  of  their 
holdings  diminished  by  public  action.  In  this  way,  by  float¬ 
ing  just  as  many  securities  as  possible  a  double  advantage  is 
gained  by  the  promoters.  First,  they  “  line  ”  their  own 
pockets  with  organization  profits.  Second,  they  deceive  the 
public  as  to  the  actual  amount  of  investment,  make  the 
profits  of  the  enterprise  look  small  and  thereby  ward  off 
legislation  designed  to  reduce  rates  or  improve  and  extend 
service.  The  essential  dishonesty  of  the  issuance  of  stocks 
and  bonds  bearing  on  their  face  the  imprint  of  value  to  the 
amount  of  a  certain  number  of  dollars  when  this  imprint 
bears  no  relation  to  actual  investment  or  to  actual  value  is 
evident.  The  floating  of  securities  for  the  public  to  buy, 
when  the  basis  of  these  securities  is  intangible  and  evanescent, 
works  a  great  injustice  upon  the  public,  which  under  modern 
industrial  conditions  is  compelled  to  look  to  stocks  and  bonds 
as  a  principal  avenue  for  investment  and  saving.  The  in¬ 
stability  of  value  attaching  to  these  securities  founded  on 
dreams  and  hope  is  a  constant  menace  to  business  conditions 


116 


MUNICIPAL  FRANCHISES. 


and  commercial  integrity.  Furthermore,  by  the  increase  of 
capitalization  until  dividends  are  nominal  or  non-existent  and 
without  publicity  of  accounts  to  reveal  the  fraud,  companies  are 
often  enabled  to  keep  up  their  rates  to  an  unreasonable  point 
and  refuse  to  improve  service  to  the  point  of  efficiency  that  may 
be  justly  expected  of  them.  Indeed,  the  bonds  of  public  utility 
companies  secured  by  property  and  rights  in  the  streets  become 
semi-public  obligations  and  should  be  counted  in  with  the 
municipal  debt  in  any  estimate  of  the  burdens  one  generation 
is  saddling  upon  the  next  for  public  improvements. 

Overcapitalization  can  be  checked  or  prevented  by  various 
provisions  that  should  be  inserted  in  franchises.  Irrespective 
of  any  general  law  requiring  companies  to  apply  to  the  proper 
public  authorities  for  the  approval  of  their  issues  of  stocks 
and  bonds,  such  a  provision  should  be  inserted  in  the  fran¬ 
chise  itself.  It  should  also  be  provided  that  no  securities  shall 
be  issued  except  for  actual  investment  of  cash  to  their  full 
par  value.  Franchises  should  never  be  capitalized  except  to 
the  amount  paid  to  the  city  for  them  in  money  when  they  are 
first  received.  In  Massachusetts  there  is  a  general  rule  that 
bonds  of  gas  and  electric  companies  may  not  be  issued  in 
excess  of  the  amount  of  capital  stock  subscribed  and  paid  in 
at  par;  and  the  indebtedness  of  telephone  and  telegraph  com¬ 
panies  is  limited  to  one-half  the  amount  of  their  paid-in 
capital  stock.1  Possibly  these  limitations  may  be  too  stringent, 
but  certainly  public  utility  companies  should  not  be  permitted 
to  mortgage  themselves  for  a  greater  proportion  of  the  value 
of  their  tangible  property  than  the  maximum  proportion 
which  conservative  loans  bear  to  the  value  of  the  real  estate 
against  which  they  are  placed.  Otherwise  the  operation  and 
control  of  the  public  utility  plant  are  in  the  hands  of  ad¬ 
venturers  who  are  using  other  people’s  property  and  have 
no  sufficient  interest  in  anything  but  schemes  for  paying 
themselves  high  salaries  and  speculating  in  other  people’s 
rights.  The  issue  of  bonds  or  capital  stock  against  a  public 
utility  operating  under  a  franchise  should  be  scrutinized  as 
carefully  by  the  public  authorities  as  is  the  creation  of  new 
bonded  debts  by  the  city.  If  consolidations  and  mergers  of 

1.See  General  Laws  of  Massachusetts  relating  to  the  Manufacture  and  Sale  of 
Gas  and  Electricity,  compiled  by  the  Board  of  Gas  and  Electric  Light  Commis¬ 
sioners,  1906,  p.  5  ;  also  Laws  Relating  to  the  Work  of  the  Massachusetts  Highway 
Commission,  1906,  p.  46. 


TEMPTATIONS  TO  PUBLIC  WRONG.  H? 

companies  is  permitted,  it  should  be  on  condition  that  there 
be  no  increase  in  capitalization  over  the  aggregate  amount  of 
the  capitalization  of  the  companies  before  the  merger.  One 
way  of  limiting  capitalization  indirectly  is  by  the  grant  of 
short  term  or  indeterminate  franchises  so  that  the  com¬ 
panies  will  not  be  able  to  deceive  the  public  by  the  claim  of 
perpetual  rights  of  enormous  value.  While  it  may  be  ad¬ 
mitted  that  inherently  there  is  no  reason  why  a  public  utility 
company  should  not  be  able  to  double  or  treble  the  value  of 
its  invested  capital  by  the  cultivation  of  good  will,  the 
development  of  efficient  business  organization,  and  the  ap¬ 
preciation  of  real  estate,  just  as  any  other  kind  of  a  corpora¬ 
tion  may  do  under  existing  laws,  there  is  nevertheless  this 
difference,  namely,  that  a  public  utility  is  in  a  special  sense 
a  public  business  which  should  be  conducted  primarily  with 
a  view  to  its  effect  upon  the  welfare  of  the  community.  If 
in  granting  franchises  the  city  reserves  the  right  to  pur¬ 
chase  the  plant  and  obligates  itself  to  do  so  whenever  the 
franchise  is  terminated,  the  business  becomes  one  of  limited 
risk  and  should  be  satisfied  with  limited  profits.  Con¬ 
sequently,  rates  should  be  reduced  and  the  service  extended 
and  improved  so  as  to  absorb  practically  all  the  increment 
of  value  over  and  above  the  original  investment.  In  other 
words,  the  aim  should  be  not  only  to  prevent  the  issue  of 
stocks  and  bonds  of  par  value  in  excess  of  the  actual  cash  in¬ 
vestment,  but  also  to  keep  the  market  value  of  these  secu¬ 
rities  as  close  to  their  par  value  as  possible.  Finally,  publicity 
of  accounts,  most  pregnant  of  reforms,  will  enable  reasonably 
prudent  investors  to  guard  against  the  fraudulent  or  rainbow- 
tinted  representations  of  promoters  and  make  it  increasingly 
difficult  to  float  paper  securities.  In  granting  a  franchise  a 
city  should  also  stipulate  that  no  bonds  be  issued  against  the 
property  running  past  the  expiration  of  the  grant,  if  the 
grant  is  for  a  definite  term,  and  ample  provision  should  be 
made  to  insure  that  the  plant  will  be  kept  up  to  its  full  value 
until  all  bonds  are  paid  off.  Otherwise  the  city  might  buy 
the  property  at  an  appraised  valuation  less  than  the  par  value 
of  the  bonds  outstanding  against  it.  In  that  case  the  bond¬ 
holders  could  foreclose  their  mortgage  and  take  possession  of 
the  property  unless  the  city  raised  its  bid  for  the  property 
to  the  par  value  of  the  bonds. 


118 


MUNICIPAL  FRANCHISES. 


91.  Looting  the  utility  through  financial  jugglery — One 

of  the  natural  results  of  overcapitalization  and  especially  of 
overbonding,  is  the  failure  to  provide  a  depreciation  fund  and 
the  skimping  of  maintenance  and  repairs.  The  way  in  wThich 
the  financial  jugglers  who  formerly  controlled  the  street  rail¬ 
ways  of  Chicago  and  New  York  ravished  the  properties  they 
held  in  order  to  keep  up  as  long  as  possible  the  fiction  of 
enormous  values  and  to  complete  the  discomfiture  of  investors 
is  one  of  the  most  dastardly  offenses  in  the  long  list  of  crimes 
of  negligence  and  looting  charged  up  against  public  and 
semi-public  agencies  in  American  cities.  The  expected  incre¬ 
ment  of  franchise-value  to  be  wrung  from  the  ever-increas¬ 
ing  necessities  of  the  ever-increasing  millions  of  people  was 
counted  on  to  offset  the  depreciation  of  plant  and  equipment 
and  the  charges  of  the  junk-heap.  And  so,  when  through  the 
franchise  taxes,  transfer  requirements,  changes  of  motive 
power  and  other  improvements  -which  were  to  be  expected  with 
the  increase  in  population  and  the  elimination  of  competition, 
the  grand  collapse  came,  the  receivers  found  in  the  plant,  a 
servant  that,  like  the  serf  of  a  brutal  overlord,  had  been  robbed 
of  property  and  credit  and  left  starved  and  emaciated  to 
perform  the  Herculean  labor  of  transporting  the  city’s  millions. 
The  hardships  of  inadequate  or  abandoned  service,  doubled  or 
trebled  fares,  routes  cut  in  two  and  systems  dissolved  affected 
the  public  as  vitally  as  the  cancellation  of  leases  and  default 
on  interest  affected  stockholders  and  bondholders.  In  view 
of  these  possibilities,  it  is  essential  that  every  franchise  for 
street  railways  or  any  other  public  utility  should  make 
adequate  provisions  to  insure  the  up-keep  of  the  property. 
More  important  than  low  rates,  more  important  than  com¬ 
pensation  for  franchises,  more  important  even  than  a  seat 
for  every  passenger,  and  far  more  important  than  dividends 
on  watered  stocks,  is  the  simple  and  absolute  requirement  that 
the  plant  of  any  public  utility  shall  be  kept  up  to  the  highest 
state  of  efficiency,  representing  in  actual,  undiscounted  value 
every  item  in  its  inventory.  There  is  no  room  for  fictitious 
assets  and  long  lists  of  brokendown  cars,  and  horses  that 
have  been  dead  these  many  years.  Here  again  publicity  of 
accounts,  thorough  and  far-reaching,  will  do  yeoman’s  work. 
But  other  specific  provisions  are  required.  A  certain  per¬ 
centage  of  gross  receipts  should  be  set  aside,  under  franchise 


TEMPTATIONS  TO  PUBLIC  WRONG. 


119 


provisions,  for  repairs  and  renewals,  and  another  definite 
percentage  for  depreciation.  Power  should  be  reserved  to  the 
city  or  some  supervising  authority  to  compel  particular  ex¬ 
penditures  for  maintenance  and  up-keep  when  necessary  to 
protect  the  public  interest.  In  case  one  company  leases  its 
property  to  another,  the  lessor  company  should  be  compelled 
under  its  franchise  to  require  the  lessee  to  maintain  the 
plant  and  equipment  to  be  turned  back  at  the  expiration  or 
forfeiture  of  the  lease  intact  in  quantity  and  unimpaired  in 
value.  The  whole  scheme  of  inter-company  guarantees  of 
bonds  is  calculated  to  confuse  the  investor  and  cheat  him  in 
the  end.  A  company  whose  property  is  leased  to  another  and 
its  bonds  guaranteed  has  no  sufficient  incentive  to  insist  on 
the  maintenance  of  the  integrity  of  its  property  while  the 
bondholders  are  lulled  to  sleep  by  the  guarantee  of  the  other 
company,  which  is  generally  a  more  important  one.  The 
result  is  likely  to  be  neglect,  depreciation  and  in  the  long 
run  ruin.  It  is  pathetic  to  see  long-term  leases  held  by  the 
Metropolitan  Street  Railway  Company  of  New  York  can¬ 
celled  one  by  one  at  the  behest  of  the  United  States  District 
Court  and  the  roads  of  the  lessor  companies  returned  to 
them  wrecked  and  in  some  cases  practically  stripped  of 
equipment. 

92.  Running  a  school  of  theft. — “Thou  shalt  not  steal! 
Every  passenger  who  does  not  pay  his  fare — steals.  Every 
conductor  who  does  not  turn  in  fares  collected — steals.  Thou 
shalt  not  steal !  ”  This  is  the  legend  that  was  posted  in  the 
cars  of  the  Third  Avenue  Railroad  system  in  New  York 
City  by  the  receiver  when  he  began  to  operate  the  property 
early  in  1908  after  its  lease  had  been  cancelled  by  the  Met¬ 
ropolitan  interests.  In  the  face  of  the  revelations  then 
recent,  these  words  read  like  a  mockery.  The  receivers  for 
the  Metropolitan  system  at  about  the  same  time  estimated 
their  annual  loss  from  the  dishonesty  of  conductors  and  pas¬ 
sengers  at  between  one  and  two  millions  of  dollars.  Street 
railway  companies  everywhere  complain  of  the  abuse  of 
transfer  privileges  by  unscrupulous  passengers  and  not  in¬ 
frequently  conductors  and  motormen  are  found  to  be  involved 
in  conspiracies  to  rob  the  company.  Whatever  the  cause  of 
these  delinquencies  may  be,  it  is  certainly  an  evil  of  tre¬ 
mendous  import  to  have  public  service  corporations  conduct- 


120 


MUNICIPAL  FRANCHISES. 


ing  their  business  under  such  conditions  as  to  make  thieves 
wholesale.  We  suspect  that  the  cheating  of  companies  on  a 
large  scale,  either  by  their  employees  or  by  their  patrons,  is 
largely  the  result  of  the  bad  reputations  of  the  men  at  the 
top.  With  the  scandals  of  stock  jobbery,  financial  manipula¬ 
tion  and  robbery  in  the  millions  of  dollars,  on  everybody’s 
lips  until  they  have  become  almost  a  tradition,  it  requires  a 
very  tender  conscience  to  keep  a  conductor  from  protecting 
himself  against  losses  that  would  result  from  his  mistakes 
in  ringing  up  fares.  Having  gone  thus  far,  he  is  not  likely  to 
mourn  if  he  finds  a  few  extra  nickels  in  his  pocket  at  night. 
Furthermore,  a  passenger  who  has  frequently  been  outraged 
by  abominable  service  and  been  compelled  to  ride  home  after 
a  hard  day’s  work  jostled  and  almost  crushed  by  a  strap-hang¬ 
ing  crowd  can  hardly  be  expected  to  hunt  up  the  conductor 
who  has  passed  him  and  pay  his  nickel  which  he  has  reason 
to  believe  will  be  expended  in  large  part,  not  in  improving  the 
service,  but  in  bolstering  up  the  fictitious  securities  out  of 
which  millionaire  highwaymen  have  made  their  fortunes. 
No  doubt,  for  his  own  sake,  every  passenger  should  pay  his 
fare  and  every  conductor  should  scrupulously  account  to  his 
employer  for  every  penny  collected,  steadfastly  refusing  to 
learn  at  the  school  of  theft  conducted  by  the  bandits  organ¬ 
ized  under  the  name  of  a  street  railway  company.  The  op¬ 
portunities  for  cheating  by  employees  and  patrons  are  not  the 
same  in  other  public  utilities  as  in  the  street  railway  busi¬ 
ness.  Dishonest  methods  by  those  in  charge  have  a  similar 
effect,  however,  upon  the  general  attitude  of  mind  toward 
them.  In  the  case  of  the  telephone  service  the  “  school  ” 
conducted  by  a  negligent  company  is  generally  one  of  bad 
manners  and  untruthfulness  rather  than  of  theft.  In  some 
cities  the  telephone  girl  is  a  symbol  of  impudence  and  dis¬ 
courtesy.  There  can  be  no  doubt  that  this  results  from  the 
bad  conditions  under  which  she  is  required  to  work.  It  may 
be  that  her  pay  is  inadequate,  or  her  hours  too  long,  or  her 
duties  too  onerous  or  her  overseers  too  much  like  slave- 
drivers.  It  is  difficult  to  provide  against  these  evils  in  fran¬ 
chise  grants  except  indirectly  by  the  various  means  already 
suggested  to  secure  good  service  and  to  limit  dishonesty  and 
recklessness  in  corporate  management.  There  are  various 
devices  such  as  pay-as-you-enter  cars,  strict  transfer  rule3. 


TEMPTATIONS  TO  PUBLIC  WRONG. 


121 


the  employment  of  spotters  and  the  use  of  cash  registers  into 
which  each  passenger  puts  his  fare  with  his  own  hand,  by 
the  use  of  which  cheating  on  street  railways  may  be  reduced 
to  a  minimum.  It  would  not  be  possible  to  stipulate  in 
detail  concerning  these  devices  in  a  franchise-grant.  The 
city  is  primarily  concerned  in  seeing  that  the  company  it¬ 
self  sets  a  good  example  and  in  cooperating  with  it  as  far 
as  necessary  to  secure  the  payment  of  every  fare  due  and  the 
accounting  for  it.  The  city  has  a  double  interest  in  this 
matter.  Not  only  is  it  important  to  eliminate  the  special 
temptations  to  dishonesty  in  the  case  of  a  large  body  of 
citizens,  but  it  is  necessary  that  all  fares  be  collected  in  order 
to  make  improvements  in  service  and  reductions  in  rates  pos¬ 
sible.  It  is  also  desirable  that  when  the  city  buys  the  prop¬ 
erty,  if  it  does,  the  utility  should  not  be  hampered  by  habitual 
losses  of  income. 

93.  Destroying  the  safety,  comforts  and  beauty  of  city 
life. — In  preceding  sections  the  special  classes  of  injuries  in¬ 
flicted  by  public  service  corporations  upon  individuals, 
whether  patrons,  employees  or  other  citizens,  have  been 
briefly  discussed.  Some  of  these  injuries  have  a  public  as 
well  as  an  individual  side.  The  network  of  wires  that  hinders 
the  work  of  the  firemen  in  fighting  to  save  one  man’s  prop¬ 
erty,  increases  the  general  fire  hazard  of  the  city.  The  poles 
and  wires  that  interfere  with  access  to  the  land  of  a  par¬ 
ticular  individual  are  part  of  a  general  system  that  destroys 
the  beauty  of  the  streets.  The  mutilation  of  a  particular 
citizen’s  shade  tree  is  typical  of  a  practice  that  helps  to  make 
the  city  ugly.  The  noise  and  dust  from  the  street  cars  that 
depreciate  the  value  of  the  land  belonging  to  a  certain 
definite  citizen  are  a  part  of  a  general  nuisance.  The  dense 
smoke  belching  from  the  stacks  of  the  street  railway  power 
house,  the  water  works  pumping  station  or  the  central  electric 
light  plant  spreads  gloom  and  dirt  over  an  entire  neighbor¬ 
hood.  The  beauty  and  comfort  of  life  of  the  city  should  not 
be  unnecessarily  sacrificed  to  utility.  Placing  wires  under¬ 
ground  is  a  great  step  in  advance.  Eequiring  that  the  poles 
in  the  streets  shall  be  of  uniform  shape  and  height  and  neatly 
painted  is  a  help.  The  designs  of  lamp  posts  and  electric 
signs  may  well  be  made  subject  to  approval  by  the  proper 
city  authority.  The  trimming  of  shade  trees  by  telephone, 


122 


MUNICIPAL  FRANCHISES. 


telegraph  and  electric  light  companies  should  certainly  be 
subject  to  the  supervision  of  the  city  forester  or  some  other 
competent  official.  Water  companies  may  be  required  to 
design  their  reservoirs  and  standpipes  so  that  they  will  be 
ornamental  as  well  as  useful.  The  sprinkling  of  streets,  the 
laying  of  heavy,  well-jointed  rails  flush  with  the  pavement 
on  a  firm  road-bed,  the  painting  of  cars  and  keeping  car 
trucks  in  repair,  and  other  methods  already  suggested  of 
improving  street  railway  service  and  making  the  street  car 
company  perform  its  natural  obligations  as  a  special  occu¬ 
pant  of  the  streets,  will  tend  to  reduce  the  noise  and  dust 
that  generally  make  the  presence  of  cars  on  any  particular 
street  disagreeable  to  residents  there.  An  active  smoke  in¬ 
spector  supported  by  a  franchise  requiring  the  installation 
of  smoke-preventing  devices  may  have  considerable  success 
in  mitigating  the  public  service  corporation  smoke  nuisance. 

Perhaps  the  most  serious  way,  however,  in  which  fran¬ 
chise  holding  companies  tend  to  disturb  public  comfort  is  in 
the  constant  tearing  up  of  the  streets  for  the  construction 
or  repair  of  underground  fixtures.  It  often  seems  astonish¬ 
ing  that  business  can  continue  to  be  done  in  spite  of  these 
long-drawn-out  and  frequently-recurring  interferences  with 
the  ordinary  uses  of  the  city  highways.  The  trouble  can  be 
greatly  lessened  by  franchise  provisions  and  ordinance  regu¬ 
lations  requiring  the  companies  to  place  their  fixtures  under 
the  streets  in  advance  of  the  original  paving  or  at  the  time 
of  repaving.  This  requirement  would  be  reasonable  in  almost 
all  cases  where  water  or  gas  pipes  or  electric  light  or  tele¬ 
phone  conduits  are  involved.  It  is  also  desirable  that  the 
companies,  when  compelled  to  open  a  street  for  the  purpose 
of  repairing  their  fixtures,  should  complete  the  work  and 
replace  the  pavement  within  a  certain  time  fixed  by  the 
public  authorities  in  connection  with  the  granting  of  a  permit 
for  the  opening.  Better  still,  wherever  it  is  feasible,  is  the 
requirement  that  as  many  fixtures  as  possible  shall  be  placed 
in  conduits  or  pipe  galleries  where  they  can  be  repaired  or 
from  which  they  can  be  removed  without  breaking  up  the  sur¬ 
face  of  the  streets.  The  use  of  the  space  under  the  sidewalks 
may  sometimes  be  required  to  advantage. 

94.  Interest  in  opposing  improved  building  regulations _ 

In  a  city  like  New  York  or  Chicago,  where  office  buildings 


TEMPTATIONS  TO  PUBLIC  WRONG. 


123 


are  high  and  tenement  and  dwelling  houses  are  built  up 
almost  solidly,  the  difference  between  good  housing  and  bad 
represents  a  great  difference  in  the  demand  for  artificial 
light.  Where  lofty  buildings  housing  tens  of  thousands 
of  people  engaged  in  high-class  work  are  crowded  together  in 
a  congested  center,  dark  rooms  and  corridors  call  for  a  very 
large  use  of  gas  or  electric  light  during  the  hours  of  the  day 
when  there  is  the  least  demand  elsewhere,  and  consequently 
■when  gas  and  electricity  can  be  furnished  with  most  profit  by 
lighting  companies.  The  same  is  true  where  hotels,  apart¬ 
ment  houses  and  tenements  are  built  so  high  and  so  close 
together  that  it  is  impossible  to  let  the  sunshine  into  all  the 
rooms  where  people  live.  One  of  the  worst  curses  of  New 
York  has  been  the  dark  bedrooms.  The  resistance  to  regula¬ 
tions  limiting  the  height  of  buildings  and  especially  to  tene¬ 
ment  house  regulations  limiting  the  proportion  of  the  lot 
which  may  be  covered  with  buildings  and  requiring  adequate 
provision  for  light  and  fresh  air  in  the  dwellings  of  the  poor, 
has  been  extremely  tenacious.  It  is  a  marvel  of  modern  civili¬ 
zation  that  the  conditions  existing  in  New  York  and  to  a  less 
extent  in  many  other  great  American  cities  should  ever  have 
been  permitted  to  grow  up  even  at  the  dictates  of  greed.  The 
writer  is  not  aware  that  the  companies  engaged  in  supplying 
artificial  light  have  actively  contributed  to  the  forces  opposing 
proper  building  regulations  in  any  city.  It  is  clear,  however, 
that  the  conditions  which  enable  the  lighting  companies  to 
reap  rich  profits  from  the  misfortunes  of  the  community  are 
such  as  to  offer  serious  temptation  at  critical  times.  Ac¬ 
cording  to  the  standards  of  citizenship  still  prevailing  in  this 
country,  which  do  not  require  a  citizen  to  sacrifice  his  own 
financial  interests  for  the  benefit  of  the  state  excepting  on 
extraordinary  occasions,  it  could  not  be  expected  that  the 
gentlemen  engaged  in  supplying  gas  and  electric  light  to  a 
great  city  would  heartily  join  in  a  movement  for  fewer  dark 
places  where  people  live  and  work. 

95.  Competition  vs.  monopoly  in  public  utility  enter¬ 
prises. — Our  entire  discussion  thus  far  has  been  based  on  the 
hypothesis  that,  generally  speaking,  every  franchise  establishes 
or  adds  to  an  essential  monopoly.  This  hypothesis  is  not 
entirely  borne  out  by  the  facts,  however.  The  idea  that  com¬ 
petition  may  bring  relief  from  the  poor  service  and  exor- 


124 


MUNICIPAL  FRANCHISES. 


bitant  charges  of  an  unregulated  monopoly  is  slow  to  yield 
to  the  facts  of  experience.  Every  city  has  tried  to  secure 
competition  in  public  utilities,  thereby  confessing  its  im¬ 
potence  properly  to  regulate  monopoly  by  direct  action.  Even 
Tom  L.  Johnson,  himself  a  successful  railway  organizer  and  a 
keen  thinker  in  politics  and  economics,  chose  competition 
as  the  best  weapon  available  to  club  the  Cleveland  street 
railway  monopoly  into  submission,  but  only  as  a  tem¬ 
porary  expedient  to  be  abandoned  as  soon  as  he  could  effect 
a  suitable  settlement  with  the  old  company  or  drive  it  out 
entirely.  About  thirty  years  ago  there  were  several  actively 
competing  gas  companies  in  New  York  City,  whose  fierce 
competitive  struggles  forced  the  price  of  gas  down  to  75  cents 
per  thousand  cubic  feet,  but  the  companies  soon  formed  a 
pool  and  put  the  price  back  to  $2.25.  A  little  later  actual 
consolidation  took  place.  In  the  early  days,  it  was  not  so  ap¬ 
parent  as  it  is  now  that  the  street  railways  of  a  city  should  be 
operated  as  a  unified  system.  When  horses  and  mules  sup¬ 
plied  the  only  motive  power,  it  was  quite  usual  to  grant  a 
separate  franchise  for  each  principal  route.  A  multiplicity  of 
companies  was  seen  in  every  city,  until  gradually  they  were 
gathered  together  into  one  ownership  or  at  least  brought  under 
one  control.  It  is  a  curious  fact  that  at  the  present  time 
there  is  apparently  more  competition  in  the  telephone  busi¬ 
ness  than  in  any  other  public  utility,  and  this  in  spite  of  the 
fact  that  of  all  public  utilities  the  need  of  monopoly  is  great¬ 
est  in  telephony.  Of  the  great  American  cities,  Philadelphia, 
St.  Louis,  Baltimore,  Cleveland,  Buffalo,  Pittsburg,  Detroit, 
Minneapolis,  St.  Paul,  Louisville,  Indianapolis,  Kansas  City, 
Seattle  and  perhaps  others  maintain  two  telephone  com¬ 
panies  each.  In  Portland,  Oregon,  the  people  showed  their 
abiding  hope  in  competition  by  granting  a  franchise  for  a 
second  telephone  system  in  1906  under  the  Initiative.  But 
after  all,  competition  brings  forth  a  new  franchise  only  to  see 
it  devoured  by  monopoly.  It  is  a  sad  thing  to  see  how  the 
numerous  progeny  of  hope  are  found  to  perish  almost  as  soon 
as  they  are  born. 

96.  Monopoly  limited  by  indirect  competition. — All  of 

the  outstanding  franchises  for  any  particular  utility  may  be 
held  by  a  single  company,  and  still  the  rigors  of  monopoly 
will  be  somewhat  mitigated  by  indirect  competition.  Surface 


TEMPTATIONS  TO  PUBLIC  WRONG. 


125 


street  railways,  just  when  their  promoters  are  figuring  on 
golden  harvests  from  perpetual  monopoly  franchises,  are  com¬ 
pelled  to  meet  the  competition  of  subways,  elevated  roads, 
and  high  speed  electric  or  suburban  steam  roads.  This  com¬ 
petition  can  hardly  be  said  to  cut  down  the  demand  for 
surface  street  railway  transportation,  but  it  does  prevent  it 
from  increasing  as  rapidly  as  it  otherwise  would.  Moreover 
bicycles,  motor  cycles  and  automobiles  provide  means  of  trans¬ 
portation  that  absorb  a  considerable  portion  of  the  demand. 
It  is  not  inconceivable  that  at  some  future  time  aerial  trans¬ 
portation  lines  may  compete  to  an  appreciable  extent  with 
street  railways.  Gas  and  electricity,  unless  joined  together 
into  a  single  monopoly,  are  serious  competitors  both  for  light 
and  for  power.  So  far  as  light  is  concerned  both  of  these 
utilities  have  to  compete  with  kerosene  oil  and  acetylene  gas. 
In  some  communities,  natural  gas  brings  disastrous  competi¬ 
tion  to  manufactured  gas  and  greatly  reduces  the  consumption 
of  electricity.  For  power  electricity  and  gas  have  to  compete 
with  gasoline  and  denatured  alcohol.  For  fuel  they  must 
compete  with  coal,  coke,  wood  and  oil.  Just  now  the  wits 
of  the  world  are  being  focussed  on  the  problem  of  perfecting 
apparatus  for  producing  gas  directly  from  coal  in  every 
separate  manufacturing  plant  and  thereby  cutting  down  the 
cost  of  light  and  power  enormously.  It  is  possible  that  what 
now  seem  to  be  the  best-intrenched  and  most  profitable 
monopolies  may  suddenly  find  their  colossal  economic  struc¬ 
tures  falling  to  pieces  by  reason  of  their  having  been  under¬ 
mined  by  new  processes.  Telephones  are  not  at  present 
seriously  threatened  with  new  forms  of  competition,  but  the 
telephone  itself  has  come  in  as  a  competitor  of  the  telegraph 
and  the  mails  and  the  street  railways.  The  telegraph  is 
threatened  by  the  telepost,  and  the  Morse  system  by  the 
wireless  of  Marconi.  Express  monopolies,  which  ordinarily 
are  not  classed  as  municipal,  are  likely  to  have  to  meet  the 
competition  of  the  parcels  post  and  the  pneumatic  tube 
service.  And  so  all  the  way  through  the  list,  there  are 
limitations  upon  the  power  of  monopoly  which  tend  even 
under  exclusive  franchises  to  make  it  easier  for  the  city 
to  regulate  public  utility  companies  than  it  would  be  if 
they  did  not  have  to  meet  either  direct  or  indirect  competi¬ 
tion. 


126 


MUNICIPAL  FRANCHISES. 


97.  Monopoly  strengthened  by  alliances. — Gas  and  elec¬ 
tricity  are  natural  competitors,  but  the  laws  of  the  state  and 
the  franchises  of  the  city  frequently  permit  them  to  form 
alliances.  When  the  gas  company  owns  the  electric  light 
company  and  Standard  Oil  interests  own  the  gas  company,  it 
can  readily  be  seen  that  there  is  a  lighting  monopoly  hard 
to  beat.  On  account  of  the  large  use  of  electrical  energy  to 
propel  street  cars,  there  is  a  tendency  for  street  railway  com¬ 
panies  and  electric  lighting  companies  to  consolidate,  or  at 
least  to  harmonize  their  interests.  Electric  and  water  plants, 
though  not  natural  competitors,  find  economies  in  consolida¬ 
tion.  Telephone  and  telegraph  companies  are  likely  to  affiliate 
and  control  messenger  companies.  Street  surface  railways, 
subways  and  elevated  roads  seem  naturally  to  drift  toward  a 
common  control,  and  in  some  communities  the  steam  railroad 
interests  have  absorbed  the  electric  railways.  In  Connecticut 
more  than  four-fifths  of  the  electric  railway  mileage  is  either 
owned  or  leased  by  the  New  York,  New  Haven  and  Hartford 
Railroad.  The  surface,  elevated  and  subway  lines  of  Boston 
are  under  monopoly  control.  Most  of  the  surface,  all  of  the 
elevated  and  part  of  the  old  steam  roads  of  Brooklyn  are 
affiliated  under  the  paternal  care  of  a  single  holding  company. 

The  New  York  Subwav  and  the  Manhattan  elevated  lines 

%/ 

are  operated  together.  In  1908  there  was  much  talk 
of  the  organization  of  a  monster  company  to  consolidate  the 
street  surface,  and  elevated  roads  and  the  electric  light  and 
power  interests  of  Chicago.  Thus  we  see  that  if  two  utilities 
begin  to  compete,  they  promptly  consolidate.  What  franchise 
utilities  lose  by  actual  or  threatened  rivalry  is  quickly  made 
up  by  wider  alliances  and  more  gigantic  consolidations. 
This  tendency  is  aptly  illustrated  by  the  name  under  which 
New  Jersey  utilities  are  for  the  most  part  operated.  It  is 
simply  “  The  Public  Service  Corporation  ”. 

98.  Monopoly  advantages  limited  by  increase  in  cost  of 
service.— Even  with  the  indirect  competition  of  substitute 
services  eliminated  by  combination  and  alliance,  the  strength 
of  monopoly  is  likely  to  be  somewhat  impaired  in  unlooked- 
for  ways.  It  is  a  principle  of  commerce  and  manufacture 
that  the  larger  the  business  the  more  cheaply  it  can  be  done 
per  unit.  This  rule  is  subject  to  serious  modifications  when 
applied  to  public  utilities.  It  is  true  that  gas  and  electrical 


TEMPTATIONS  TO  PUBLIC  WRONG. 


127 


energy  can  be  produced  more  cheaply  at  large  central  plants 
than  in  small  scattered  ones.  But  the  congestion  of  a  great 
city  adds  tremendously  to  the  cost  of  construction  and  main¬ 
tenance  of  the  fixtures  in  the  streets.  This  is  due  primarily 
to  two  reasons.  In  the  first  place  the  presence  of  multifarious 
fixtures  in  the  limited  space  available  makes  it  more  difficult 
to  find  a  place  for  a  new  one.  The  process  often  involves 
the  rearrangement  of  fixtures  already  laid,  which  is  usually 
difficult  and  expensive  work.  In  the  second  place,  the  heavy 
traffic  on  the  street  makes  it  necessary  to  do  construction  and 
repair  work  by  night  or  at  other  inconvenient  times  or  to 
suffer  constant  interruptions  and  delays  while  doing  it.  With 
street  railways,  the  speed  of  cars  is  diminished  and  the  wear 
and  tear  of  tracks  and  pavement  multiplied  by  street  conges¬ 
tion.  Furthermore,  as  the  city  grows  bigger,  the  regular 
rides  grow  longer  while  the  fare  usually  remains  fixed.  Land 
for  car  houses,  repair  shops,  power  stations,  gas  works  and 
central  administrative  offices  costs  much  more  as  cities  grow 
larger.  In  the  telephone  service  especially,  as  the  number  of 
subscribers  increases  the  cost  of  the  service  rendered  to  each 
one  increases.  Every  new  subscriber  means  a  new  connection 
possible  for  every  other  subscriber.  Soon  the  company  is 
compelled  to  divide  its  territory  into  exchanges  and  provide 
for  a  double  service  where  a  subscriber  in  one  exchange  calls 
another  subscriber  in  a  different  exchange.  The  average 
length  of  the  telephone  wire  that  the  company  must  supply 
and  keep  in  repair  becomes  greater  as  the  city  grows.  The 
failure  to  anticipate  properly  the  inevitable  increase  in  the 
cost  of  service  has  doubtless  been  responsible  for  many  of 
the  blunders  shrewd  men  have  made  in  the  management  and 
manipulation  of  various  public  utility  properties. 

99.  Influence  of  the  Junk-Heap  on  Monopoly  Advantages. 
— All  in  all,  the  advantages  of  an  exclusive  franchise  to 
furnish  a  public  utility  are  held  on  a  precarious  tenure.  It 
is  not  to  be  wondered  at  that  public  service  corporations 
clutch  greedily  at  immediate  profits  and  often  neglect  wise 
provision  for  the  future.  One  of  the  greatest  drawbacks  in 
the  whole  business  is  that  the  demand  for  improvements  is 
constant.  The  old  horse  railway  lasted  many  years.  It  was 
more  than  thirty  years  after  the  introduction  of  street  railways 
before  the  feasibility  of  using  electricity  for  motive  power 


128 


MUNICIPAL  FRANCHISES. 


was  thoroughly  demonstrated.  The  industry  could  hardly 
complain  when  the  ancient  horse  cars  and  worn  out  tracks 
were  sent  to  the  scrap-heap.  There  had  been  ample  time  to 
get  the  original  investment  back  in  earnings.  The  new 
motive  power  promised  only  advantages.  The  greater  amount 
of  capital  needed  to  begin  with  was  more  than  offset  by 
economy  in  operation.  Greater  speed,  larger  and  more  com¬ 
fortable  cars,  cleaner  streets,  more  travel  were  the  promises 
for  the  future.  These  promises  were  realized.  But  just  be¬ 
fore  electricity  came  to  be  accepted  as  the  motive  power  of  the 
future,  in  an  evil  day  some  unlucky  enemy  of  the  race 
invented  the  cable  system  of  traction.  This  system  was 
installed  in  many  cities,  involving  enormous  expenditures  of 
capital  which  soon  were  seen  to  be  wasted.  Cables  had  to  be 
abandoned  in  a  few  years.  They  left  a  tremendous  load  of 
dead  capital  on  the  shoulders  of  the  street  railway  business. 
In  the  meantime  costly  experiments  with  compressed  air  and 
storage  battery  motors  were  being  carried  on.  Even  after 
electricity  won  as  the  motive  power  the  question  arose  as  to 
whether  the  overhead  or  the  underground  system  should  be 
adopted.  Overhead  construction  is  comparatively  cheap  and 
so,  nearly  everywhere,  overhead  trolleys  carried  the  day.  But 
there  is  no  telling  how  soon  in  any  great  city,  the  companies 
may  be  compelled  to  abandon  their  overhead  wires  and  go  to 
the  enormous  expense  of  installing  the  underground  system. 
When  that  is  done  the  trackless  trolley  may  appear  on  the 
scenes  and  turn  the  costly  roadbeds  and  tracks  into  waste. 
The  history  of  other  utilities  has  been  similar.  Telephone, 
telegraph  and  electric  light  wires  have  been  driven  under¬ 
ground;  patents  essential  at  first  have  become  useless,  old 
processes  and  old  machinery  have  been  discarded,  gas  and 
water  pipes  that  have  been  found  to  be  too  small  have  been 
replaced  by  larger  ones,  and  so  on.  The  demand  for  better 
fixtures  and  more  expensive  service  has  gone  hand  in  hand 
with  improvement  in  the  arts.  The  public  service  men  have 
hardly  had  a  chance  to  catch  their  breath  and  earn  a  dividend 
before  they  have  been  forced  into  some  new  reconstruction 
and  addition  to  fixed  charges. 

100.  Advantages  of  monopoly  affected  by  fluctuations  in 
the  value  of  money. — It  is  next  to  impossible  for  a  com¬ 
pany  operating  under  a  franchise  to  raise  its  rates.  This 


TEMPTATIONS  TO  PUBLIC  WRONG. 


129 


is  due  partly  to  the  fixing  of  maximum  charges  in  franchise 
and  statute  law.  It  is  also  partly  due  to  the  tremendous 
popular  resistance  that  manifests  itself  when  rates  and  charges 
are  increased.  Five  cents  has  always  been  the  standard  street 
railway  fare  in  this  country  and  three  cents  has  been  the  fare 
for  which  the  radicals  have  contended.  Meantime,  in  the 
course  of  the  long-drawn-out  dispute,  there  has  been  a  tre¬ 
mendous  increase  in  the  production  of  gold.  This  has  meant 
a  sharp  advance  in  the  prices  of  all  other  commodities  and  a 
corresponding  decrease  in  the  purchasing  power  of  a  nickel. 
If  this  process  were  carried  far  enough  we  might  get  “  three 
cent  ”  fares  without  any  decrease  whatever  in  the  nominal 
rates.  The  process  by  which  the  value  of  money  appreciates 
is  so  silent  that  the  battle  for  lower  fares  is  apt  to  go  merrily 
on  as  if  nothing  had  happened  until  the  swollen  values  of 
franchises  gradually  disappear  and  the  companies,  hard- 
pushed,  go  into  the  hands  of  receivers.  Under  these  circum¬ 
stances  the  strength  of  monopoly  is  undermined  by  the  course 
of  events.  But  the  people  keep  on  striking  after  their  foes 
are  down.  These  same  considerations  hold  good  in  relation 
to  other  utilities,  though  there  is  no  other  standard  rate  so 
nearly  universal  as  the  five-cent  fare.  Evidently,  it  is  the 
part  of  wisdom  to  get  away  as  rapidly  as  possible  from  a  fixed 
maximum  charge  to  be  enforced  without  regard  to  local  or 
temporary  conditions.  Rates  should  be  based  upon  the  cost 
of  the  service.  For  the  sake  of  stability  a  certain  amount  of 
leeway  may  be  allowed  “  for  lean  years  ”,  provided  that  some 
practical  scheme  is  devised  by  which  the  public  may  absorb 
the  surplus  in  prosperous  years.  In  describing  the  program 
upon  which  the  Chicago  Traction  ordinances  of  1907  were 
based.  Miss  Tarbell  says : 1 

“  It  meant  that  if  the  companies  accepted  it,  they  recognized 
the  principle  that  'public  utilities  are  henceforth  out  of  the 
field  of  exploitation.  It  meant  that  if  the  Chicago  public 
accepted  it,  they  recognized  the  principle  that  capital  honestly 
invested  in  a  public  service  is  entitled  to  a  fair  return  and  to 
an  assurance  of  the  security  of  its  investment ”  When  these 
principles  are  fully  accepted,  rigid  maximum  fiat  rates  will 
not  be  necessary,  and  readjustment  to  marked  changes  in  the 
value  of  money  will  be  possible. 

*  American  Magazine  for  December,  1908,  p.  132. 


130 


MUNICIPAL  FRANCHISES. 


101.  Fundamental  principles  generally  agreed  upon. 

— There  have  been  established  in  the  hard  school  of  experience 
certain  fundamental  principles  relating  to  the  problem  of 
public  utilities.  With  due  regard  to  modifying  circum¬ 
stances  and  minor  limitations  it  may  be  fairly  said  that  these 
principles  are  generally  recognized  as  sound  by  men  who  have 
thought  upon  this  problem.  These  principles  are — 

(1.)  That  a  public  utility  requiring  special  and  per¬ 
manent  fixtures  in  the  streets  cannot  be  operated  with  a  high 
degree  of  success  from  the  standpoint  of  either  its  managers 
or  the  public  except  as  a  monopoly. 

(2.)  That  on  this  account  a  franchise  grant,  no  matter  to 
whom  it  is  given  or  what  provisions  it  may  contain  against 
consolidation,  will  either  remain  unused  or  establish  a 
monopoly  or  add  to  the  privileges  of  a  monopoly  already  ex¬ 
isting.  There  are  many  apparent  exceptions  in  the  early 
history  of  franchises,  but  as  the  years  pass  on  every  live 
franchise  seeks  the  warm  bosom  of  monopoly. 

(3.)  That  public  utilities  whose  importance  justifies  the 
granting  of  special  franchises  in  the  streets  render  services 
of  general  interest  to  the  people  living  adjacent  to  the  streets 
traversed  by  such  utilities. 

(4.)  That  the  interests  of  the  public  demand  continuous, 
uninterrupted  service,  extending  over  as  wide  an  area  as 
practicable  and  constantly  expanding  as  population  increases 
and  spreads  out. 

(5.)  That  the  absence  of  competition  or  its  inadequacy 
as  a  force  for  regulating  rates  and  service  renders  it  neces- 
sary  for  the  public  authorities  to  maintain  on  behalf  of  the 
public  a  constant  supervision  over  the  exercise  of  a  special 
franchise. 

(6.)  That  aside  from  the  inherent  necessity  of  public 
control  for  any  particular  utility,  the  demand  upon  the  streets 
for  general,  varied  and  increasing  uses  makes  it  imperative 
for  the  public  authorities  to  maintain  a  continuing  control 
of  the  public  highways,  undiminished  by  any  irrevocable  or 
perpetual  special  franchise. 

The  present  and  future  welfare  of  many  millions  of 
American  citizens  is  intimately  concerned  with  the  intel¬ 
ligent  application  of  these  principles. 

102.  The  elimination  of  special  franchise  values. — Still 


TEMPTATIONS  TO  PUBLIC  WRONG.  131 

another  principle  may  be  deduced  from  experience  and  a  just 
consideration  of  the  public  welfare.  It  is  this : 

(7.)  That  public  utilities,  whether  operated  by  the  city 
or  by  private  companies,  should  be  so  regulated  as  to  render 
good  service  at  cost,  including  in  cost  a  sufficient  amount 
for  operating  expenses,  maintenance,  depreciation  and  a  fair 
return  upon  the  amount  of  capital  actually  invested.  It 
may  be  desirable  to  make  rates  high  enough  to  retire  the 
investment  within  a  fixed  period  of  years.  In  other  words 
all  the  monetary  value  should  be  regulated  out  of  franchises, 
except  that  proper  allowances  may  be  made  for  fluctuations  in 
earning  power.  Under  such  conditions  there  would  be  no 
franchise  values  to  tax  except  in  unusually  prosperous  years. 

This  principle  is  based  upon  the  theory  that  the  possession 
of  a  special  privilege  to  use  the  streets  in  a  special  way  should 
not  be  made  the  occasion  for  the  exploitation  of  those  who 
ride  in  street  cars  or  who  use  telephones,  gas  or  electric  light. 
The  street  should  not  pay  taxes  either  for  the  enrichment  of 
privilege-holders  or  for  the  relief  of  landowners.  The  streets 
should  be  open  and  free  to  all  comers.  The  idea  of  private 
highways  or  highways  exploited  for  special  private  interests 
is  repugnant  to  the  idea  of  democracy.  It  should  be  care¬ 
fully  noted  that  this  statement  is  not  a  declaration  in  favor' 
of  public  operation  as  opposed  to  private  operation  of  street 
railways  or  other  utilities.  It  is  simply  a  declaration  that 
whoever  operates  the  utilities  should  be  required  to  do  so 
without  the  enjoyment  of  any  of  the  peculiar  profits  of 
monopoly.  Under  private  ownership  this  result  can  be  best 
obtained  by  the  recognition  of  the  principle  of  limited  risks 
and  limited  profits,  with  compensation  to  the  city  foregone 
for  the  benefit  of  lower  rates  and  better  service.  Under 
public  ownership  it  would  mean  that  utilities  should  not 
be  operated  for  the  relief  of  tax-payers.  Failure  to  grasp 
this  principle  has  led  in  some  cases  to  the  peculiar  anomaly 
of  limiting  the  suffrage  on  franchise  referendums  to  direct 
tax-payers.  It  should  be  clearly  recognized  that  the  streets, 
so  far  as  they  are  devoted  to  public  travel,  transportation 
and  communication  do  not  belong  in  any  sense  to  the  tax¬ 
payers  as  such,  but  to  the  general  public.  To  permit  the  direct 
tax-payers  to  control  public  utility  policies  is  to  invite  the 
exploitation  of  the  great  mass  of  those  who  own  and  use  ease- 


132 


MUNICIPAL  FRANCHISES. 


merits  in  the  streets  by  a  special  class  of  citizens.  It  is  trne 
that  the  value  of  land  is  intimately  affected  by  the  nature  and 
efficiency  of  the  public  services  available  to  those  who  live  on 
it.  But  under  an  equitable  system  of  taxation  the  benefits 
would  be  absorbed  by  the  public,  and  the  special  damages 
would  be  borne  by  the  public  by  means  of  the  remission  or 
reduction  of  the  taxes  levied  against  the  land.  “  Good 
service  at  cost,”  is  the  slogan. 


PART  II. 

PIPE  AND  WIRE  FRANCHISES. 


CHAPTER  VI. 


ELECTRIC  LIGHT,  HEAT  AND  POWER  AS  A  PUBLIC 

UTILITY. 


103.  History  and  growth  of  the  utility.  110.  Competitive  grants. 

104.  Uses  of  electrical  current.  111.  Putting  wires  underground. 

105.  Electrical  equipment.  112.  Peak  loads  and  special  rates  for  dif- 

106.  Patents,  licenses  and  parent  and  ferent  services. 

holding  companies.  113.  Development  of  water  power  and 

107.  Combination  with  other  industries.  interurban  transmission  of  cur- 

108.  Municipal  and  private  plants.  rent. 

109.  Special  conditions  affecting  this 

public  utility. 

103.  History  and  growth  of  the  utility. — The  first  central 
electric  station  operating  arc  lamps  was  installed  in  San 
Francisco  in  1879,  using  the  Brush  system.1  The  Edison 
system  of  incandescent  lighting  was  first  put  into  operation 
in  connection  with  a  central  station  in  1880.2  It  appears, 
therefore,  that  electric  lighting  as  a  public  utility  has  had  a 
development  of  about  thirty  years.  The  growth  of  the  in¬ 
dustry  has  been  extremely  rapid.  The  Bureau  of  the  Census, 
in  its  special  investigation  of  this  industry  in  1902,  found  a 
total  of  3,620  central  electric  stations  in  operation.  By 
1907,  this  number  had  increased  to  4,714.  This  utility  ex¬ 
tends,  not  only  to  the  great  cities,  but  to  towns  and  villages 
having  only  a  few  hundred  inhabitants.  While  it  is  true 
that  over  20  per  cent  of  the  investment  in  this  utility  and 
nearly  25  per  cent  of  its  gross  income  in  1902  were  found  in 
the  six  cities  having  a  population  of  more  than  500,000 
each,  on  the  other  hand  it  is  to  be  noted  that  there  were,  at 
that  time,  2,714  central  electric  stations  in  places  of  less  than 
5,000  inhabitants.  This  number  constituted  75  per  cent  of 
the  total  number  of  stations  in  operation.  It  is  significant 
that  less  than  23  per  cent  of  the  gas  plants  in  operation  in 

1  Special  Reports,  Bureau  of  the  Census ;  “  Central  Electric  Light  and  Power 
Stations  ;  1902,”  p.  90. 

*  Ibid.,  p.  95. 


135 


136 


MUNICIPAL  FRANCHISES. 


1900  were  found  in  these  small  towns.1  The  total  cost  of 
construction  and  equipment  of  the  stations  in  operation  in 
1902  was  upwards  of  $500,000,000,  and  the  gross  income  for 
the  year  was  more  than  $85,000,000.2  These  figures  grew  in 
the  next  five  years  to  nearly  $1,100,000,000  and  $176,000,- 
000  respectively.  The  output  per  day  in  1902  was  6,960,000 
kilowatt  hours,  or  nearly  9,300,000  horse-power  hours.3  The 
year  1907  showed  an  increase  of  133.8  %  over  these  figures. 
The  total  amount  of  stock  issued  by  private  companies  oper¬ 
ating  central  electric  stations  was,  in  1902,  just  short  of 
$373,000,000,  and  the  outstanding  funded  debt  amounted  to 
$254,000,000,  making  a  grand  total  of  $627,000,000,  out¬ 
standing  at  that  time.4  Here,  also,  five  years  wrought  won¬ 
ders,  for  in  1907  the  total  of  outstanding  stocks  and  bonds  had 
grown  to  the  enormous  aggregate  of  $1,342,000,000.  The 
importance  of  the  industry  from  another  standpoint  is  shown 
by  the  fact  that  the  average  number  of  wage  earners  em¬ 
ployed  in  connection  with  electric  light,  heat  and  power 
plants  was  23,330,  in  1902,  and  34,642  in  1907;  while  their 
wages  amounted  to  nearly  $15,000,000  in  the  former  year 
and  $23,700,000  in  the  latter.5  The  wage  earners  included 
foremen,  inspectors,  engineers,  firemen,  dynamo  and  switch¬ 
men,  linemen,  mechanics  and  lamp  trimmers,  as  well  as  un¬ 
skilled  laborers  and  clerical  employes. 

104.  Uses  of  electrical  current. — The  first  use  of  elec¬ 
tricity  as  a  public  utility  was  for  arc  and  incandescent  light¬ 
ing.  Its  use  has  since  been  developed  in  many  ways.  Elec¬ 
trical  current  is  now  supplied  for  running  street  cars,  for 
charging  automobiles,  for  operating  stationary  machinery, 
for  the  operation  of  elevators,  for  electric  heaters,  for  electric 
fans,  for  steel  drills  and  many  other  uses.  Electrical  current 
is  even  supplied  for  the  operation  of  dentists’  apparatus,  for 
electroplating  and  for  the  quick  production  of  photographs 
and  engravings.  “  The  refinement  of  modern  conveniences 
in  the  utilization  of  current  from  central  station  sources  of 
supply  ”,  says  the  census  report,6  “  can  best  be  understood  by 

1  “Central  Electric  Light  and  Power  Stations,”  op.  cit.,  p.  14. 

a  Thid.,  p.  6. 

a  Ibid.,  p.  81. 

*  Ibid.,  p.  16. 

•  The  figures  for  1907  are  taken  from  the  Preliminary  Report  released  by  the 
Census  Bureau  January  12,  1909;  and  from  information  furnished  by  the  Director 
of  the  Census  July  1,  1909. 

«  “  Central  Electric  Light  and  Power  Stations,”  op.  cit.,  p.  103. 


ELECTRIC  LIGHT,  HEAT  AND  POWER. 


137 


seeing,  in  the  modern  city  house,  the  elevators  operated  by 
electric  motors,  electric  cooking  apparatus  and  flat-irons  in 
use  in  the  kitchen,  incandescent  lamps  and  fan  motors  in 
the  living  rooms,  and  electric  curling  irons,  foot-warmers  and 
electro^hermic  pads  in  the  bedrooms,  all  connected  by  flexi¬ 
ble  cords  and  wall  plugs  to  circuits  that  are  brought  to  them 
by  means  of  interior  conduits  which  run  back  to  the  main 
cut-out  box  in  the  area  vault,  where  the  circuits  are  tapped 
off  from  the  street  mains/’  Perhaps  the  most  spectacular 
use  of  electrical  current  is  for  electric  signs,  the  illumination 
of  buildings  and  other  advertising  purposes.  In  fact,  elec¬ 
trical  illumination  in  the  streets  and  public  buildings,  on 
bridges  and  towers,  and  at  pleasure  resorts,  constitutes  one 
of  the  most  glittering  attractions  of  modern  city  life.  These 
varied,  interesting  and  necessary  uses  have  made  this  utility 
one  of  the  most  important  of  those  which  are  dependent  upon 
public  franchises  for  successful  operation. 

105.  Electrical  equipment. — A  plant  for  the  generation 
and  distribution  of  electrical  current  includes  many  kinds 
of  equipment.  In  the  first  place,  there  must  he  the  machinery 
for  supplying  the  primary  motive  power  and  for  transform¬ 
ing  this  power  into  electricity.  The  primary  machinery  con¬ 
sists  of  steam  engines,  water  wheels  or  gas  engines,  accord¬ 
ing  to  the  source  of  power  used  in  a  particular  plant.  The 
machinery  for  transforming  primary  power  into  electrical 
energy  consists  of  dynamos  of  various  types.  In  the  second 
place,  there  must  be  storage  batteries  to  supply  the  extra 
current  needed  at  times  of  greatest  demand,  and  transform¬ 
ers  to  reduce  or  increase  the  voltage  to  suit  the  uses  to  which 
the  current  is  to  be  put.  The  installation  and  operation  of 
the  kinds  of  equipment  already  mentioned  do  not,  for  the 
most  part,  involve  the  use  of  the  public  streets ;  and,  accord¬ 
ingly,  are  not  so  directly  subject  to  municipal  regulation  as 
are  other  parts  of  the  equipment.  The  distributing  system 
of  an  electrical  plant  consists  of  overhead  wires  stretched  on 
poles  or  underground  wires  placed  in  conduits,  with  service 
wires,  lamps,  motors,  etc.,  attached.  So  far  as  pole  lines, 
main  wires  and  feeders  are  concerned,  ownership  is  always 
vested  in  the  operating  company.  Underground  conduits 
are  sometimes  owned  by  the  operating  company,  sometimes 
by  the  city,  and  sometimes  by  an  independent  conduit  com- 


138 


MUNICIPAL  FRANCHISES. 


pany.  Moreover,  pole  lines  are  frequently  used  in  common 
by  different  companies,  so  that  the  particular  poles  used  by 
a  company  are  not  necessarily  owned  by  it.  So  far  as  service 
wires  and  incandescent  and  arc  lamps  are  concerned,  there  is 
no  invariable  rule  of  ownership.  Meters  are  now  in  general 
use  and  are  always  owned  by  the  company.  There  are  still 
some  instances,  however,  in  which  the  charge  for  lighting  is 
a  flat  rate,  so  that  no  meter  is  required.  Electric  motors, 
including  machinery  for  the  operation  of  ventilators,  eleva¬ 
tors,  hoisting  apparatus,  etc.,  are  not  usually  owned  by  the 
operating  company.  It  is  in  connection  with  the  distributing 
system,  the  erection  of  poles,  the  stretching  of  wires,  the  con¬ 
struction  of  conduits  beneath  the  surface  of  the  streets, 
the  wiring  of  buildings,  the  installation  of  lamps  and  the 
operation  of  meters,  that  municipal  control  is  usually  exer¬ 
cised. 

106.  Patents,  licenses,  and  parent  and  holding  companies. 

— The  development  of  the  electrical  industry  and  its  control 
by  municipal  and  state  authorities,  have  been  largely  affected 
by  the  license  system.  The  various  inventions  for  the  util¬ 
ization  of  electricity  for  light,  heat  and  power,  have  been 
patented  by  their  inventors.  These  patents  have  usually  been 
held  by  “  parent  ”  companies,  whose  policy  has  been  to 
manufacture  the  necessary  apparatus  and  license  local  com¬ 
panies  in  the  different  cities  to  use  it  in  the  operation  of 
public  utility  plants.  To  begin  with,  the  parent  companies 
received  from  the  licensee  companies  a  proportion  of  the  full 
paid  capital  stock  and  bonds  of  the  latter  companies  in  re¬ 
turn  for  the  right  to  use  the  former  companies’  patents.  The 
license  was  usually  accompanied  hy  a  contract  which  bound 
the  licensee  company  to  purchase  its  apparatus  or  a  certain 
proportion  of  it  directly  from  the  parent  company  at  fixed 
prices.  This  system  naturally  led  to  the  capitalization  of 
patents  and  licenses,  which  in  the  course  of  time,  as  exclusive 
rights  expired,  became  of  little  or  no  value.  Control  by  the 
parent  companies  has  been  largely  maintained,  however, 
through  contracts  for  supplying  apparatus.  In  recent  years 
there  have  grown  up  a  good  many  holding  companies,  wrhich 
make  it  their  business  to  buy  up,  in  various  parts  of  the 
country,  lighting  plants  that  are  not  financially  prosperous. 

“When  plants  are  thus  brought  under  one  management”,  says  the 


ELECTRIC  LIGHT,  HEAT  AND  POWER. 


139 


census  report,1  “  all  the  supplies  for  them  are  bought  in  common  and 
consequently  are  cheaper  ;  the  employees  are  subject  to  sharper  disci¬ 
pline,  and  the  engineering  supervision  is  more  careful  than  in  the 
separate  plants  ;  therefore,  the  plants,  as  a  whole,  are  likely  to  be  in 
much  better  condition  and  also  much  more  progressive  than  they  were 
as  scattered  units  in  struggling  communities 

It  may  be  added  that  companies  of  this  kind,  while  un¬ 
doubtedly  tending  toward  more  efficient  service,  at  the  same 
time  render  control  by  local  authorities  more  difficult,  and 
increase  the  possibility  of  the  exercise  of  undue  political  in¬ 
fluence  on  the  part  of  the  group  at  any  particular  crisis  in 
the  affairs  of  any  local  company.  The  holding  company, 
having  brought  a  large  number  of  small  plants  under  unified 
control,  is  able  to  concentrate  the  financial  and  political  re¬ 
sources  of  the  whole  combination  at  any  particular  point 
where  the  interests  of  a  company  may  be  in  jeopardy  from 
unfavorable  political  action. 

107-  Combination  with  other  industries. — The  manu¬ 
facture  and  distribution  of  electricity  is  inherently  the  least 
monopolistic  of  public  service  utilities.  It  is  less  monopo¬ 
listic  than  the  telephone,  because  it  makes  no  difference  to 
the  consumer  of  electricity  whether  his  neighbor  gets  cur¬ 
rent  from  the  same  central  station  or  not.  It  is  less  monopo¬ 
listic  than  street  railways,  the  gas  industry,  or  the  water  sup¬ 
ply,  for  the  reason  that  there  is  less  waste  in  the  duplication 
of  wires,  and  more  salvage  when  they  are  removed  from  their 
original  locations,  than  in  the  case  of  street  railway  tracks, 
gas  pipes  or  water  pipes.  Largely  for  this  reason,  city  coun¬ 
cils  have  probably  looked  to  competition  for  relief  in  the 
electric  lighting  and  power  business  more  frequently  than  in 
any  other  industry  dependent  upon  franchise  grants.  Never¬ 
theless,  the  inevitable  tendency  toward  monopoly  has  shown 
itself  everywhere.  In  1902,  there  were  253  electric  railway 
companies  that  were  engaged  in  the  sale  of  electrical  current 
for  light  and  power,  and  a  considerable  number  of  electric 
light  and  power  companies  that  were  supplying  electrical 
current  for  the  operation  of  railways.2  About  40  per  cent 
of  all  the  central  electric  stations  covered  by  the  special 
census  report  for  1902  were  carried  on  in  conjunction  with 
the  manufacture  of  gas,  the  operation  of  water  works,  the 

1  “Central  Electric  Light  and  Power  Stations,”  op.  cit.,  p.  19. 

*  “  Ibid.,'1  op.  cit.,  p.  6. 


140 


MUNICIPAL  FRANCHISES. 


production  of  ice,  or  other  industries.1  Naturally,  electric 
lighting  is  furnished  in  sharp  competition  with  gas  and 
other  means  of  artificial  illumination.  The  disadvantages  of 
competition,  from  the  standpoint  of  the  companies,  have 
been  so  great  as  to  lead  to  the  combination  of  gas  and  electri¬ 
cal  interests  in  many  cities.  The  tendency  toward  combin¬ 
ation  between  lighting  and  power  interests  is  well  illus¬ 
trated  by  the  experience  of  New  York  City.  In  old  New 
York  the  electric  lighting  business  is  entirely  dominated  by 
the  Consolidated  Gas  Company,  while  throughout  the  Greater 
City  all  of  the  more  important  gas  and  electrical  companies 
are  controlled,  through  stock  ownership,  by  Standard  Oil 
interests;  so  that  there  is  practically  no  competition  among 
the  vendors  of  the  various  illuminants  anywhere  in  Greater 
New  York.  Another  striking  illustration  of  the  tendency 
toward  combination  with  other  public  utilities,  is  found  in 
the  case  of  the  Public  Service  Corporation  of  New  Jersey, 
which  controls  practically  all  of  the  street  railway  business  of 
northern  New  Jersey,  and  of  the  gas  and  electric  lighting 
business  over  a  still  wider  area.  The  activities  of  this  cor¬ 
poration  extend  to  Newark,  Jersey  City,  Hoboken,  Elizabeth, 
Bayonne,  the  Oranges,  Camden,  Trenton,  Paterson  and  other 
towns.  The  gas  and  electric  light  industries  have  also  been 
consolidated  in  Baltimore,  St.  Paul,  Denver  and  other  great 
cities  of  the  country. 

108.  Municipal  and  private  plants. — Municipal  operation 
of  electric  franchises  is  more  widely  extended  than  municipal 
operation  of  any  other  utility  except  sewers  and  water  works. 
In  1902,  out  of  a  total  of  3,620  central  electric  stations,  815, 
or  22.5  per  cent,  were  owned  and  operated  by  cities.2  The 
municipal  plants,  however,  averaged  much  smaller  than  the 
private  plants,  and  were  in  the  most  important  cases  confined 
to  public  lighting.  The  cost  of  municipal  stations  was 
only  $22,000,000,  or  4.4  per  cent  of  the  total  cost  of  all  the 
stations.  The  income  of  municipal  stations  was  only  8.1  per 
cent;  the  expenses,  7.7  per  cent;  and  the  horse-power  capacity 
of  their  dynamo  plants,  9.4  per  cent,  of  the  total.  The 
municipal  stations  gave  employment  on  the  average  to  three 
wage  earners  each,  while  the  private  stations  gave  employ- 


1  “  Central  Electric  Light  and  Power  Stations,”  op.  cit p.  14. 
*  Ibid.,  p.  6. 


ELECTRIC  LIGHT,  HEAT  AND  POWER. 


141 


ment  to  7.4  wage  earners  each.  Among  the  great  cities, 
Chicago,  Detroit  and  Allegheny  furnished  the  most  conspicu¬ 
ous  examples  of  municipal  electric  light  plants.  In  the 
38  cities  having  more  than  100,000  population,  in  1902  there 
were  10  municipal  plants  and  93  private  plants,  while  in 
towns  having  less  than  5,000  population,  the  number  of 
municipal  plants  was  671  as  against  2,043  private  plants. 
The  development  of  municipal  ownership  has  been  especially 
rapid  in  Massachusetts  and  some  of  the  North-Central  states. 
Wherever  the  general  laws  of  the  states  or  the  special  char¬ 
ters  of  the  cities  give  the  local  authorities  the  right  to  estab¬ 
lish  electric  light  and  power  plants,  either  for  public  lighting 
or  for  a  general  commercial  business,  the  possibility  of  the 
exercise  of  this  right  is  an  important  factor  in  the  granting 
of  franchises  to  private  companies. 

109.  Special  conditions  affecting  this  public  utility — In 
preceding  chapters  we  have  discussed  at  some  length  the 
various  conditions  which  affect  the  operation  of  public  utili¬ 
ties  generally.  It  is  necessary  briefly  to  point  out  some  of  the 
peculiar  conditions  surrounding  the  manufacture  and  dis¬ 
tribution  of  electrical  energy  as  a  public  utility,  which  have 
an  important  bearing  upon  the  granting  of  franchises.  In 
the  first  place,  the  distribution  of  high  tension  electrical 
currents  by  means  of  wires  suspended  in  the  streets  and 
connected  with  the  houses,  is  a  source  of  great  public  danger. 
Both  life  and  property  are  in  jeopardy  unless  extraordinary 
precautions  are  taken  to  prevent  the  escape  of  current  from 
its  established  channels.  The  principal  recognized  danger 
to  property  from  overhead  wires  and  from  the  wiring  of 
buildings,  is  the  danger  from  fire.  If  wires  are  placed  under¬ 
ground  in  conduits  and  are  properly  insulated,  there  is  little 
danger  of  the  destruction  of  other  sub-surface  structures 
through  the  escape  of  current.  In  early  franchises,  however, 
particular  precautions  were  taken  to  prevent  the  laying  of 
these  conduits  less  than  a  certain  distance  from  gas  and  water 
pipes.  Although  the  dangers  of  electrolysis  are  recognized 
chiefly  as  arising  from  the  operation  of  electric  railways, 
there  is  a  possibility  that  modern  skyscrapers,  with  their 
steel  frameworks,  might  have  their  strength  eaten  away  by 
stray  currents  of  electricity  due  to  defective  wiring  in  con¬ 
nection  with  the  supply  of  light. 


142 


MUNICIPAL  FRANCHISES. 


This  utility  is  also  peculiar,  to  a  certain  extent,  because  of 
the  development  of  water  power  in  connection  with  the  pro¬ 
duction  of  electrical  energy,  inasmuch  as  the  use  of  water 
power  usually  involves  the  transmission  of  electrical  current 
over  long  distances  and  the  supplying  of  several  cities  and 
towns  from  a  single  source.  The  industry,  therefore,  be¬ 
comes  interurban  or  state-wide  in  character  and  not  easily 
amenable  to  local  control. 

Still  another  peculiarity  of  this  utility  arises  out  of  the 
fact  that,  in  order  to  supply  the  demand  for  current  at  the 
time  of  maximum  use,  an  equipment  must  be  maintained 
which  under  ordinary  conditions  would  remain  idle  during 
most  of  the  twenty-four  hours  of  the  day.  This  circumstance 
makes  the  development  of  special  uses  of  electrical  current 
of  the  utmost  importance  to  the  business  and  creates  a  com¬ 
plex  situation  with  reference  to  the  regulation  of  rates  and 
the  prevention  of  discrimination,  which  is  extremely  difficult 
to  handle  with  justice  to  all  parties  concerned. 

110.  Competitive  grants. — There  is  hardly  a  city  in  the 
country  that  has  not  granted  several  general  electric  light 
franchises.  Indeed,  competition  was  so  thoroughly  recog¬ 
nized  at  the  beginning  of  the  industry  as  proper  and  possible 
that  in  some  cases  general  franchises  were  granted  to  all 
companies  desiring  to  supply  electric  light  and  power. 
Sometimes  these  general  franchises  were  granted  by  the 
legislature  and  did  not  require  the  consent  of  the  local  au¬ 
thorities,  while  in  other  cases  the  local  consent  was  required 
only  for  the  purpose  of  determining  the  particular  location 
of  the  pole  lines  of  the  various  companies.  As  an  example 
of  general  grants  by  local  authorities,  we  may  cite  the  fol¬ 
lowing  resolution  adopted  by  the  council  of  the  city  of 
Denver  on  February  3,  1881 1: 

“Resolved,  that  permission  be  granted  to  any  company  desiring  to 
supply  the  city  with  electric  light,  to  erect  posts  and  such  other  appli¬ 
ances  as  may  he  necessary  to  successfully  carry  on  their  business  ;  pro¬ 
vided,  that  said  companies  do  not  obstruct  the  public  thoroughfares.” 

In  Hew  York  City  in  1887  a  franchise  was  granted  to  six 
different  companies  by  the  same  resolution.  In  other  cities 
the  policy  was  followed  of  granting  a  franchise  to  any  com- 

1  “  Franchises  and  Special  Privileges  as  granted  by  the  city  and  county  of  Den¬ 
ver,”  1907,  p.  107. 


ELECTRIC  LIGHT,  HEAT  AND  POWER. 


143 


pany  that  might  apply  for  it,  or  of  granting  franchises  to 
different  companies  for  different  sections  of  the  city.  Per¬ 
haps  even  more  frequently  competing  franchises  have  been 
granted  for  the  purpose  of  forcing  down  the  rates  or  im¬ 
proving  the  service  of  the  company  or  companies  already  in 
the  field.  Sometimes  new  grants  have  been  made  for  the 
purpose  of  getting  wires  underground  or  for  the  purpose  of 
getting  an  adequate  supply  of  electric  power  or  an  extension 
of  the  public  lighting  system. 

In  the  report  of  the  National  Civic  Federation,  relative 
to  the  municipal  and  private  operation  of  public  utilities,  the 
Federation’s  investigator  gives  a  list  of  forty-seven  electric 
franchises  granted  by  the  City  of  Chicago  or  the  local  au¬ 
thorities  of  municipalities  now  a  part  of  Chicago.1  “  There 
may  be  some  franchises  not  included  in  this  list  ”,  he  says, 
“  but  a  search  for  them  through  the  scattered  records  of  the 
city  would  not  be  profitable.”  Twenty-seven  of  these  fran¬ 
chises  were  granted  by  the  city  itself,  though  only  a  few  of 
them  covered  the  entire  city.  When  the  Chicago  City  Coun¬ 
cil  passed  an  ordinance,  March  23,  1908,  prescribing  the 
rates  to  be  charged  for  electric  light  by  the  Commonwealth 
Edison  Company,  it  enumerated  in  the  ordinance  twenty- 
three  different  franchises  which  were  “  understood  to  have 
been  owned  or  claimed  ”  by  this  company  or  its  constituents, 
in  addition  to  the  two  principal  franchises  under  which  it  was 
operating. 

.  In  Denver,  after  the  consolidation  of  all  the  gas  and  elec¬ 
tric  interests,  the  city  granted  a  competing  electrical  fran¬ 
chise.  The  city  had  been  paying  $120  a  year  per  arc  lamp 
for  public  lighting,  and  the  people  were  charged  15  cents 
per  kilowatt  hour  for  incandescent  lighting.  The  new  com¬ 
pany  agreed  to  light  the  streets  at  $90  per  arc  lamp  and  to 
furnish  incandescent  lighting  at  5  cents  per  kilowatt  hour. 
The  result  was  a  fierce  competition  in  rates  between  the 
companies.  The  old  company  reduced  its  rate  as  low  as  two 
and  one-half  cents  per  kilowatt  hour,  and  finally  succeeded  in 
forcing  its  new  competitor  to  sell  out.  The  old  company, 
having  forced  its  rival  out  of  business,  then  went  into  bank¬ 
ruptcy,  had  a  receiver  appointed  and  got  a  friendly  court  to 

1  “  Municipal  and  Private  Operation  of  Public  Utilities,”  op.  cit.,  Part  II,  vol.  1. 
p.  719. 


144 


MUNICIPAL  FRANCHISES. 


order  the  cancelation  of  all  contracts  which  the  company 
had  entered  into  at  the  low  competitive  rate,  so  that  it  might 
be  able  to  continue  business  as  a  monopoly  at  a  profit.1 
These  instances  tell  the  tale  of  competing  electric  light  fran¬ 
chises. 

111.  Putting  wires  underground. — Most  early  franchises 
and  many  recent  ones  authorize  the  stringing  of  wires  upon 
poles  in  the  streets  or  alleys.  However,  low  tension  wires 
for  incandescent  lighting  were  early  placed  underground. 
Referring  to  Mr.  Edison’s  experiments  at  Menlo  Park  in 
1880,  where  for  the  first  time  he  operated  a  system  of  425 
sixteen-candle  power  lamps  to  light  the  houses,  streets, 
laboratory  and  machine  shop,  the  special  census  report 
for  1902  says2: 

“The  circuits  were  underground  conductors,  a  system  to  which  Mr. 
Edison  has  always  adhered,  not  only  because  of  the  obvious  difficulty 
there  would  be  in  carrying  overhead  the  large  mass  of  copper  necessary 
for  low  voltage  constant  potential  lighting,  but  because  he  believed 
that  with  the  conductors  underground  there  would  be  attained  a  con¬ 
stancy  of  service  without  interruption,  which  is  obviously  necessary  for 
all  central  methods  of  artificial  illumination.” 

The  multiplication  of  telegraph  wires  had,  prior  to  1880, 
constituted  a  considerable  nuisance  in  the  streets  of  great 
cities.  With  the  addition  of  telephone  wires  and  high  tension 
electric  light  and  power  conductors,  the  overhead  system 
became  not  only  a  disfigurement  to  the  beauty  of  streets,  but 
a  positive  menace  to  the  public.  It  became  apparent,  there¬ 
fore,  in  the  decade  following  1880,  that  all  electric  wires  in 
the  principal  streets  of  large  cities  would,  sooner  or  later, 
have  to  be  placed  underground.  In  fact,  many  of  the  early 
franchises,  even  in  cities  of  no  considerable  size,  reserved  to 
the  public  authorities  the  right  to  require  the  companies  to 
bury  their  wires.  While  the  stringing  of  wires  upon  pole 
lines  in  the  streets  is  a  comparatively  inexpensive  process, 
the  building  of  conduits  and  the  placing  of  wires  in  them, 
underneath  the  surface  of  the  streets,  is  very  costly.  In  the 
early  days,  before  the  methods  of  conduit  construction  were 
perfected,  the  process  wras  not  only  expensive  but  difficult 
and  for  a  time  uncertain.  It  can  be  readily  seen,  therefore, 
that  the  amount  of  the  original  investment  required  for  the 

1  See  “  The  Economic  Struggle  in  Colorado  ”,  by  J.  Warner  Mills,  published  in 
The  Arena ,  November,  1905,  pp.  488-492. 

*  Op.  cit.,  p.  95. 


ELECTRIC  LIGHT,  HEAT  AND  POWER. 


145 


construction  of  a  distributing  system  for  an  electric  light 
plant,  varies  enormously,  according  to  whether  the  overhead 
or  the  underground  system  is  used.  This  fact  brings  serious 
complications  in  relation  to  capitalization,  extensions,  com¬ 
petition  and  rates. 

112.  Peak  loads  and  special  rates  for  different  services.— 

As  long  as  electric  current  is  used  for  lighting  only,  the 
demand  during  the  summer  months,  when  the  days  are  long, 
will  be  comparatively  slight,  except  for  arc  lighting  on  all- 
night  service.  A  further  exception  should  be  made  in  the 
case  of  modern  skyscrapers  and  other  buildings  so  poorly 
constructed  or  so  closely  crowded  together  that  artificial 
light  has  to  be  used  constantly  during  working  hours.  In 
the  winter,  on  the  other  hand,  when  the  days  are  short,  the 
demand  for  lighting  in  office  buildings  and  stores  in  the  late 
afternoon  overlaps  the  demand  for  light  in  residences,  so 
that  between  four  and  six  o’clock  we  have  what  is  called  a 
“  peak  load  ”,  which  means  that,  if  a  curve  were  drawn 
showing  the  demand  for  light  at  different  hours  of  the  day, 
the  demand  curve  at  this  particular  time  would  show  a  peak. 
The  increase  of  the  demand  at  the  beginning  of  this  period 
is  very  abrupt;  and  the  decrease  at  the  close  of  the  period, 
while  not  so  abrupt,  is  nevertheless  very  marked.  Unless 
provision  is  made  for  the  storing  of  electrical  energy  pro¬ 
duced  during  other  hours  of  the  day,  it  is  necessary  to 
maintain  generating  and  distributing  equipment  of  capacity 
equal  to  this  maximum  load.  This  condition,  of  course,  adds 
very  greatly  to  the  expense  of  supplying  current. 

If  an  electric  light  and  power  plant  also  supplies  current 
for  the  operation  of  street  railways,  these  conditions  are 
likely  to  be  still  further  emphasized.  While  the  demand  for 
current  during  the  bulk  of  the  day  is  considerably  increased, 
the  heaviest  demand,  during  the  rush  hours  at  night,  comes 
at  the  same  time  as  the  heaviest  demand  for  lighting.  Under 
these  conditions  the  development  of  the  use  of  electric  power 
for  the  operation  of  various  kinds  of  machinery,  has  been  of 
extraordinary  benefit  to  the  industry. 

“  Electric  motor  service,”  says  the  special  census  report  for  1902, 1 
“whether  for  factories  or  for  electric  railways,  is  required  from  early 
daylight  until  dusk  and  often  through  the  night  hours,  whereas  light¬ 
ing,  except  in  the  case  of  street  arc  light  circuits  furnished  all  night,  is 

1  Op.  cit.,  p.  12. 


146 


MUNICIPAL  FRANCHISES. 


normally  restricted  to  a  few  hours  in  the  evening  and  possibly  one  or 
two  hours  in  the  morning  during  the  winter.  Many  critics  and  author¬ 
ities  are  of  the  opinion  that,  successful  as  the  electric  lighting  industry 
has  proven  to  be,  it  could  hardly  have  survived  and  certainly  could  not 
have  attained  its  present  proportions  in  so  short  a  space  of  time  if  the 
electric  motor  had  not  come  to  the  support  of  the  electric  lamp.” 

The  gross  income  of  central  electric  stations  operated  by 
individuals  or  private  companies  for  the  year  1902,  showed 
the  following  distribution  of  earnings:  from  arc  lighting, 
$22,091,800;  from  incandescent  lighting,  $41,297,484;  from 
other  electric  service,  $13, 960,46s.1  Discussing  rates  for 
motor  service,  the  special  census  report  says  2 : 

"From  the  fact  that  power  circuits  connected  with  central  stations 
draw  their  supply  of  current  in  the  daytime,  when  a  large  proportion 
of  the  generating  machinery  would  otherwise  stand  idle,  a  great  many 
central  stations  have  felt  that  they  could  make  concessions  and  induce¬ 
ments  in  the  way  of  special  rates  for  current.  These  lower  prices  have 
enabled  them  to  build  up  a  new  class  of  customers,  and  as  a  result  of 
the  increased  income  caused  thereby  they  have  been  able  to  employ  their 
machinery  and  operating  staff  a  greater  number  of  hours  of  the  day  and 
at  a  higher  level  of  efficiency,  as  well  as  to  employ  more  competent  men 
and  to  pay  better  wages.  So  long  as  a  company  was  restricted  to  a  few 
hours  of  lighting,  its  resources  and  income  were  limited  ;  but  with  a 
business  maintained  not  merely  for  a  few  hours  of  darkness,  but  carried 
on  almost  throughout  the  twenty-four  hours,  and  with  a  fair  proportion 
of  the  apparatus  always  in  use,  a  large  number  of  the  stations  were  put 
into  a  better  condition  financially,  and  were  enabled  to  carry  out  the  de¬ 
velopments  and  extensions  that  have  been  so  marked  a  feature  of  the 
electric  lighting  industry  during  the  past  ten  years.  In  fact,  without 
the  help  of  motors  there  would  have  been  comparatively  little  incentive 
to  introduce  the  many  modern  features  which  place  electric  current  at 
the  command  of  the  consumer  for  all  purposes,  day  and  night.” 

The  income  from  stationary  motor  service  in  1902  was  a 
little  over  12  per  cent  of  gross  earnings  from  operation. 
About  $2,300,000  was  derived  from;  supplying  current  to 
electric  railways.  This  amounted  to  approximately  3  per 
cent  of  gross  income.  From  electric  heating  there  was 
derived  about  $39,000;  and  from  the  charging  of  automobiles, 
about  $30,000,  amounts  that  were  comparatively  insignifi¬ 
cant.  Nearly  half  of  the  income  from  charging  automobiles 
was  secured  in  the  District  of  Columbia,  and  most  of 
the  rest  in  the  State  of  New  York.  Nearly  two-thirds  of  the 
entire  income  from  electric  heating  was  derived  from  the 
State  of  Minnesota.  It  should  be  noted  that,  in  addition  to 

1  “  Central  Electric  Light  and  Power  Stations,”  op.  cit.,  p.  28. 

*  Ibid.,  p.  38. 


ELECTRIC  LIGHT,  HEAT  AND  POWER. 


147 


the  sale  of  electric  current,  a  small  income  is  derived  from 
miscellaneous  sources,  including  sale  of  electrical  supplies, 
the  rental  of  electrical  equipment,  the  sale  of  surplus  steam 
for  steam  heating,  etc.  Those  sources  of  income  are,  how¬ 
ever,  comparatively  insignificant.  In  1902,  they  amounted 
to  less  than  2  per  cent  of  the  gross  receipts.1 

113.  Development  of  water  power  and  interurban  transmis¬ 
sion  of  current — The  use  of  water  power  at  Niagara  for  the 
generation  of  electrical  current  to  be  transmitted  to  Buffalo, 
Rochester,  Toronto  and  other  cities  in  the  United  States  and 
Canada,  has  given  a  great  stimulus  to  the  development  of 
water  power  elsewhere  for  similar  purposes.  As  early  as 
1902  there  were  312  central  electric  stations  operated  ex¬ 
clusively  by  water  power.  Of  these,  29  were  in  California, 
37  in  New  York  and  35  in  Michigan.  There  were  also  329 
stations  operated  by  steam  and  water  power  combined.  The 
total  number  of  water  wheels  in  use  for  supplying  primary 
power  to  central  electric  stations  was  at  that  time  1,390, 
with  a  capacity  of  upwards  of  438,000  horse-power.2  Where 
water  power  is  readily  available  for  the  generation  of  elec¬ 
tricity,  without  too  great  expense  or  loss  of  current  in  trans¬ 
mission  to  distributing  points,  it  is  much  cheaper  than  steam 
power  and  tends  to  large  reductions  in  rates,  especially  if  cur¬ 
rent  can  be  delivered  in  great  quantities  for  the  opera¬ 
tion  of  electric  railways  or  for  municipal  or  other  lighting 
plants.  The  Massachusetts  Board  of  Gas  and  Electric  Light 
Commissioners,  in  its  report  for  1907,  takes  cognizance  of  the 
rapid  development  of  water  power  in  connection  with  electric 
light  and  power  stations. 

“  So  much  progress  has  been  made  in  the  solution  of  the  various 
problems  incidental  to  the  transmission  of  large  volumes  of  electric 
energy  over  long  distances”,  says  this  report,3  “that  large  sums  of 
money  have  been  expended  in  the  development  of  water  powers  in  a 
number  of  states  for  the  generating  of  electricity  and  its  transmission 
to  a  distant  point,  there  to  be  used  for  the  supply  of  electric  light  or  of 
power  in  units  of  large  size.  Enterprises  of  this  character  are  obviously 
attracted  to  places  where  the  streams  are  of  considerable  size  and  most 
regular  in  their  flow.  As  yet  there  has  been  no  important  development 
of  this  kind  in  this  state,  but  conditions  in  this  respect  appear  to  be 
rapidly  changing. 

“  In  1904  the  Turners  Falls  Company,  theretofore  essentially  a  water 

1  “  Central  Electric  Light  and  Power  Stations,”  op.  cit.,  pp.  39,  40. 

*  Ibid.,  pp.  48,  49. 

•  Page  4. 


148 


MUNICIPAL  FRANCHISES. 


power  company,  was  authorized  to  generate,  sell  and  distribute  elec¬ 
tricity,  and  has  since  utilized  its  water  power  to  a  certain  extent  for  that 
purpose.  In  January,  1907,  the  Connecticut  River  Power  Company 
was  chartered  under  the  general  law  for  the  purpose  of  ‘  generating, 
manufacturing,  transmitting,  selling  and  in  every  fashion  dealing  in 
electricity  for  power,  and  in  general  engaging  in  and  conducting  the 
business  of  an  electric  power  company  within  the  Commonwealth’. 

‘  ‘  A  corporation  created  by  special  legislative  acts  in  the  States  of 
New  Hampshire  and  Vermont  as  the  Connecticut  River  Power  Com¬ 
pany,  but  having,  as  we  understand,  no  commercial  relations  with  the 
Massachusetts  company  of  the  same  name,  is  now  investing  a  large  sum 
of  money  in  the  development  of  a  water  power  on  the  Connecticut  River 
but  a  few  miles  north  of  the  Massachusetts  line.  The  avowed  purpose 
of  this  company  is  to  generate  electricity  and  to  sell  and  distribute  the 
same  for  power  purposes.  There  is  every  reason  to  believe  that  the  most 
attractive  and  principal  market  for  this  power  will  be  within  this  Com¬ 
monwealth.  A  company  will  doubtless  be  organized  under  the  general 
law  in  this  State  for  distributing  and  selling  power  from  this  concern. 

“  Any  effort  to  make  cheap  power  available  to  manufacturers  in  this 
State  is  one  which  should  be  welcomed  and  encouraged  in  every  way 
consistent  with  the  general  public  interest.  Although  a  company  may 
be  organized  for  the  supply  of  electric  power  only,  yet,  owing  to  the 
fact  that  electric  light  is  only  one  form  or  manifestation  of  electric  en¬ 
ergy  or  power,  and  that  such  energy  or  power  may  with  great  facility 
be  made  to  appear  as  light,  such  a  company  may  in  fact,  and  possibly 
unintentionally,  become  virtually  engaged  in  the  business  of  furnishing 
electricity  for  light  as  well  as  power.  In  any  event,  it  is  likely  to  occupy 
to  a  greater  or  less  extent  the  public  streets  and  highways  for  the  suc¬ 
cessful  and  economical  construction  of  its  lines,  resembling  in  this  and 
many  other  respects  companies  avowedly  engaged  in  the  manufacture 
and  sale  of  electricity  for  light  and  power. 

“  Under  the  existing  provisions  of  law  the  local  authorities  in  grant¬ 
ing  locations  in  the  public  streets  for  electric  lines  are  given  no  express 
authority  to  impose  conditions  or  limitations  upon  their  grant.  The  ap¬ 
peal  to  this  Board  from  their  decision  where  a  company,  corporation  or 
person  is  engaged  in  the  manufacture  or  sale  of  electric  light,  gives  to 
this  Board  no  greater  authority  to  impose  conditions  or  limitations  upon 
the  grant  of  a  location  than  is  possessed  by  the  local  authorities  in  the 
first  instance. 

‘  ‘  What  has  been  stated  suggests  that  the  time  may  have  now  arrived 
to  consider  what  additional  regulations,  conditions  or  restrictions  the 
public  interest  may  require  respecting  the  large  authority  likely  to  be 
exercised  by  such  companies  organized  under  the  general  law  to  sell  only 
electric  power,  and  by  whom  they  may  be  determined  and  imposed, 
unless  such  regulations  are  to  be  expressly  defined  and  required  by 
statute.” 

It  should  be  noted  that  the  policy  of  conservation  of 
natural  resources,  including  the  withdrawal  of  public  lands 
containing  water  power  sites,  inaugurated  by  President 
Roosevelt  in  accordance  with  the  advice  of  Gifford  Pinchot, 
has  an  intimate  hearing  upon  the  future  development  of  the 
electric  light  and  power  industry.  Indeed,  this  utility  and 


ELECTRIC  LIGHT,  HEAT  AND  POWER. 


149 


the  franchises  governing  it,  are  coming  to  have  not  only  state¬ 
wide,  but  nation-wide  complications.  Here  is  being  welded 
one  of  the  links  in  the  chain  of  interests  that  seems  destined 
to  bind  together  municipal,  state  and  national  politics  at  no 
very  distant  date. 


CHAPTER  VII. 


FRANCHISE  CONDITIONS  IMPOSED  ON  ELECTRIC  LIGHT 
AND  POWER  COMPANIES. 


114.  A  blanket  franchise— Jersey  City. 

115.  Limited  franchises,  combined  with 

steam  heating  and  gas ;  efficient 
service  ;  consolidation— Salt  Lake 
City. 

116.  Revocable  grant ;  free  lighting  ; 

painting  of  poles ;  right  to  pur¬ 
chase  plant— Duluth. 

117.  Joint  use  of  poles  and  conduits  ; 

mechanical  gong  in  connection 
with  fires — Richmond,  Va. 

118.  No  discrimination  ;  union  labor ; 

right  to  inspect  books — Nashville. 

119.  Extensions  on  petition  ;  power  and 

heat  for  city  buildings  at  cost ; 
schedule  of  rates— Rockford,  Ill. 

120.  Division  of  net  profits  over  fixed 

percentage  ;  issue  of  bonds  lim¬ 
ited— Wichita,  Ks. 

121.  A  power  franchise  accepted  by  the 

people — Grand  Rapids,  Mich. 

122.  Exclusive  for  certain  period ;  cut¬ 

ting  of  wires  ;  right  to  purchase— 
Cedar  Rapids,  Iowa. 

123.  Fixtures  to  be  removed  before  ex¬ 

piration  of  franchise— Atlanta. 

124.  Map  showing  sub-surface  struc¬ 


tures  ;  specifications  for  poles ; 
right  to  purchase  at  stated  periods 
—Columbus,  Ohio. 

125.  Municipal  franchises  not  required; 

regulation  of  rates— California. 

126.  Additional  facilities  for  city  or 

other  company  ;  compulsory  ex¬ 
tensions  of  service  ;  release  of  old 
franchise— Seattle. 

127.  Monopoly  through  consolidation  ; 

liberal  franchise  by  vote  of  tax¬ 
payers— Denver. 

128.  A  good  franchise  vetoed  because  it 

was  not  perfect — Minneapolis. 

129.  A  franchise  with  many  good  fea¬ 

tures— St.  Paul. 

130.  An  up-to-date  franchise  ordinance 

regulating  rates— Chicago. 

131.  Power  from  Niagara  Falls— Buffalo. 

132.  Perpetual  franchises  with  practi¬ 

cally  no  conditions  attached — New 
York  City. 

133.  Simple  franchises  controlled  by  a 

State  Board— Massachusetts. 

134.  Most  important  features  of  electric 

light,  heat  and  power  franchises. 


114.  A  blanket  franchise. — Jersey  City. — A  .franchise  was 
passed  by  the  Common  Council  of  Jersey  City  over  the 
Mayor’s  veto,  October  11,  1887,  granting  to  the  Jersey  City 
Electric  Light  Company  the  right  to  maintain  poles  and 
wires  “  for  all  electric  lighting  and  uses  ”  in  certain  streets 
described  in  the  ordinance.1  Poles  were  required  to  be  at 
least  25  feet  in  height  above  the  ground,  “  substantially 
straight,  and  dressed  and  painted  in  accordance  with  any 
general  ordinance  of  the  city  on  that  subject  now  existing  or 
that  may  be  hereafter  passed  Poles  were  not  to  be  erected 
in  front  of  the  land  of  any  abutting  property  owner  except 


1  Griffiths,  Revised  Ordinances  of  Jersey  City,  1899,  p.  218. 

150 


ELECTRIC  LIGHT  FRANCHISES. 


151 


in  the  manner  provided  by  the  laws  of  the  state,  and  no  shade 
tree  or  fruit  tree  could  be  trimmed  or  in  any  way  injured 
by  the  company  without  the  owner’s  consent.  The  company 
was  to  be  responsible  for  any  damage  done  to  public  or 
private  property  in  connection  with  the  construction  or  main¬ 
tenance  of  its  plant. 

The  company  was  also  authorized  to  lay  conduits  under  the 
streets,  but  they  were  not  to  be  allowed  nearer  than  three  feet 
to  any  water  or  gas  main,  except  at  points  of  crossing. 
Before  the  company  could  open  any  street  for  laying  its  con¬ 
duits  in  the  first  instance,  it  was  required  to  notify  the  Board 
of  Aldermen.  If  the  company  failed  to  comply  with  any 
provision  of  the  ordinance,  it  was  subject  to  a  fine  of  $20 
for  each  offense.  An  indemnity  bond  of  $25,000  was  required 
of  the  company  to  protect  the  city  against  damages  resulting 
from  the  company’s  operations. 

Another  franchise,  granted  by  Jersey  City,  September  11, 
1889,  is  so  brief  and  comprehensive  that  I  shall  quote  it  in 
full,  as  follows : 1 

“  Section  1.  Consent  and  authority  is  hereby  granted  to  the  Hudson 
County  Electric  Company,  a  corporation  organized  under  the  laws  of 
New  Jersey,  to  erect  posts  or  poles,  and  to  sustain  thereon  the  neces¬ 
sary  wires  and  fixtures,  and  to  lay  pipes,  conduits  and  other  apparatus, 
and  run  therein  the  necessary  wires  and  fixtures  in  certain  public  roads, 
highways,  streets,  avenues,  alleys  and  public  places  of  Jersey  City 
designated  in  section  two  following,  for  the  purpose  of  supplying  and 
distributing  electricity. 

“  Sec.  2.  All  the  highways,  streets,  avenues,  alleys  and  public  places 
in  said  city  now  or  hereafter  laid  out  or  opened  are  hereby  designated 
as  the  highways,  streets,  avenues,  alleys  and  public  places  in  which 
said  poles,  posts,  pipes  and  conduits  may  be  placed  or  laid  and  wires 
run.  Said  posts,  poles,  pipes  or  conduits  and  wires  shall  be  so  placed, 
laid  and  run  under  the  supervision  of  the  committee  on  streets  of  this 
board  and  with  the  least  possible  inconvenience  to  the  public. 

‘  ‘  Sec.  3.  Said  company  shall  indemnify  and  save  harmless,  the  said 
city  of  Jersey  City  from  all  damages  which  may  be  awarded  against 
said  city  in  favor  of  any  person  or  persons,  corporation  or  corporations 
resulting  from  any  act  or  thing  done  by  said  company  by  virtue  of  the 
authority  and  consent  herein  granted.” 

In  June,  1908,  a  franchise  was  granted  by  the  Board  of 
Aldermen  and  vetoed  by  the  Mayor,  which  showed  a  con¬ 
siderable  advance  upon  the  one  just  quoted.  This  grant 
was  in  favor  of  the  Mutual  Benefit  Light  and  Power  Com¬ 
pany  and  was  limited  to  a  period  of  twenty  years.  The  com- 

1  Griffiths,  op.  cit.  p.  217. 


152 


MUNICIPAL  FRANCHISES. 


pany  was  to  use  the  underground  conduit  system  only,  and 
was  to  construct  at  least  two  miles  of  conduits  a  year  and 
equip  them  for  the  supply  and  distribution  of  electric  light, 
heat  and  power.  Eates  for  electric  current  were  limited  to 
eight  cents  per  killowatt  hour,  with  five  per  cent  discount  on 
bills  paid  within  five  days  from  the  date  of  presentation. 
The  company  was  also  to  pay  the  city  five  per  cent  of  its 
gross  receipts.  At  the  expiration  of  the  period  of  the  grant, 
the  city  was  authorized  to  purchase  the  pipe  and  conduits  in  the 
streets  “  upon  the  payment  of  the  value  thereof,  excluding 
franchise  rights,  to  be  fixed  by  arbitration,  in  case  the  city 
desires  to  purchase  the  same  The  company  was  also  re¬ 
quired,  before  disturbing  the  surface  of  any  street  for  laying 
its  conduits,  to  deposit  with  the  City  Clerk  an  amount  equal 
to  75  cents  per  lineal  foot  of  conduit  to  be  laid,  as  security 
for  the  restoration  of  the  street  to  its  former  condition.  In 
vetoing  this  ordinance,  the  Mayor  suggested  that  certain  other 
limitations  should  be  imposed  upon  the  company.  He 
thought  that  the  ordinance  should  limit  the  number  of  feet 
of  street  opening  to  be  permitted  at  any  one  time,  and  that 
some  reasonable  regulation  should  be  imposed  to  protect  both 
the  city  and  the  company  from  the  nuisance  that  would  arise 
from  the  use  of  soft  coal  in  the  company’s  plant.  He  also 
suggested  that  an  effort  be  made  to  prevent  the  company  from 
selling  its  franchise  or  consolidating  with  any  other  company, 
by  the  insertion  of  the  following  clause: 

“Said  company  agrees  that  it  will  not  merge,  consolidate  or  enter 
any  agreement  in  restriction  of  competition  with  any  other  company 
supplying  or  to  supply  electric  light,  heat  or  power  in  Jersey  City  dur¬ 
ing  the  term  of  said  franchise,  and  in  case  said  company  shall  directly 
or  indirectly  violate  the  provisions  of  this  section,  then  the  franchise 
and  consent  hereby  given  shall  forthwith  become  void.” 

The  announced  purpose  of  the  new  company  was  to  compete 
with  the  Public  Service  Corporation  of  New  Jersey,  which, 
as  already  stated,  has  a  practical  monopoly  of  the  lighting 
business,  not  only  in  Jersey  City,  but  in  all  the  principal 
cities  of  the  state. 

115.  Limited  franchises  combined  with  steam  heating 
and  gas ;  efficient  service  ;  consolidation— Salt  Lake  City. — 

A  franchise  “  for  the  purpose  of  conveying  electrical  currents 
by  means  of  wires  to  be  used  for  lighting,  and  also  conveying 


ELECTRIC  LIGHT  FRANCHISES. 


153 


steam  by  means  of  pipes  to  be  used  for  heating  and  propel¬ 
ling  machinery,  and  for  other  purposes  ”,  was  granted  by  the 
City  Council  of  Salt  Lake  City,  January  11,  1881,  for  a  period 
of  25  years.1  It  was  provided  that  poles  should  not  be  set 
within  six  feet  of  any  fire  hydrant,  gas  or  water  main 
or  service  pipe,  and  that  the  streets  should  be  repaired  by  the 
company  to  the  satisfaction  of  the  City  Council  within  a 
reasonable  time  after  having  been  disturbed.  The  Salt  Lake 
Power,  Light  and  Heating  Company,  to  which  this  franchise 
was  granted,  was  made  responsible  for  damages  to  persons 
or  property  resulting  from  the  company’s  negligence  in  the 
exercise  of  its  franchise  rights. 

Another  franchise  was  granted  by  Salt  Lake  City  on  May 
20,  1893,  to  the  Salt  Lake  and  Ogden  Gas  and  Electric 
Light  Company.2  This  grant  also  ran  for  the  period  of  25 
years  and  included  a  steam  heating  and  power  franchise.  It 
provided  for  both  conduits  and  pole  lines  and  also  authorized 
the  laying  of  gas  mains.  The  use  of  the  streets  by  the  com¬ 
pany  was  to  be  subject  to  the  ordinances  of  the  city,  and  all 
pipes,  conduits  and  poles  were  to  be  placed  “  at  such  points 
and  places  as  shall  be  designated  by  the  city  engineer  and  none 
other;  and  under  the  supervision  of  said  city  engineer  and 
the  board  of  public  works,  and  to  their  approval  ”.  Electric 
light  of  “  the  best  quality  and  highest  efficiency  ”  was  to  be 
furnished  at  prices  not  exceeding  the  maximum  rates  fixed 
in  the  ordinance;  but  the  company  was  authorized  to  make  a 
minimum  charge  of  at  least  $1.50  per  month.  Light  for 
hospitals  and  other  charitable  and  religious  institutions,  and 
for  the  city,  was  to  be  furnished  at  a  discount  of  10  per  cent 
from  the  maximum  rates.  It  was  specifically  provided  that 
nothing  in  the  ordinance  should  be  so  construed  as  to  prevent 
the  city  “  at  any  time  hereafter  from  changing  the  manner 
or  place  of  setting  poles  and  stringing  wires,  or  from  requir¬ 
ing  said  company,  its  successors  or  assigns,  to  place  all  wires 
or  conductors  under  ground 

About  two  months  later,  that  is  to  say,  July  30,  1893,  still 
another  franchise  was  granted  to  one,  Robert  M.  Jones,  for 
the  construction  of  pole  lines  and  conduits  equipped  with 
wires  “  for  the  transmission  of  electrical  currents,  for  fur- 

1  Salt  Lake  Power,  Light  and  Heating  Company’s  franchise,  Book  of  Ordinances, 
p.  347. 

*  Book  of  Ordinances,  p.  357. 


154 


MUNICIPAL  FRANCHISES. 


nishing  power,  light  and  heat  to  the  inhabitants,  property 
owners,  manufacturers  and  users  in  said  city  ”.x  Under  this 
franchise  the  grantee  was  required,  prior  to  the  commence¬ 
ment  of  construction,  to  file  with  the  City  Engineer  a  plat 
showing  the  proposed  location  of  poles,  wires  or  conduits; 
and  this  plat  was  to  be  subject  to  the  approval  of  the  City 
Council.  Furthermore,  the  grantee  agreed  “  to  furnish  elec¬ 
tric  lights  to  the  citizens  of  said  city,  through  standard  types 
of  incandescent  lamps,  at  a  price  not  to  exceed  one  cent  per 
hour  for  each  sixteen-candle  power  lamp,  and  a  proportionate 
charge  for  lamps  of  increased  candle  power  ”.  He  also  agreed 
to  furnish  arc  lamps  for  lighting  the  streets  at  $10  per 
month  for  each  2,000  candle  power  lamp  for  all-night  serv¬ 
ice.  Still  further,  he  agreed  “  to  supply  the  City  Council 
rooms,  city  offices  and  public  library  with  their  necessary 
current  for  lamps  from  the  time  the  station  started  continu¬ 
ously  during  the  life  of  the  franchise,  free  of  charge  ”.  It 
was  provided  that  in  case  the  grantee,  his  heirs  or  assigns, 
should  dispose  of  the  franchise  to  any  competing  company  or 
person  or  “  enter  into  any  combination  with  any  electric  light, 
gas  or  power  company,  concerning  prices  to  be  charged  for 
furnishing  light,  heat,  power  or  signals,  either  to  the  city 
or  private  consumers”,  the  franchise  should  become  void. 
It  was  also  stipulated  “that  the  said  Robert  M.  Jones,  in 
accepting  this  franchise,  agrees  to  construct  the  most  prac¬ 
tical  device  for  consuming  or  arresting  the  smoke  in  all  in¬ 
stances  wherein  coal  is  used  for  fuel  ”  under  the  grant.  The 
city  also  reserved  the  right  “to  levy  a  special  tax,  in  addi¬ 
tion  to  the  ordinary  property  tax,  upon  each  pole  erected  in 
any  street,  alley  or  public  ground  in  said  city,  of  such  sum 
per  annum  as  the  council  may  deem  reasonable  ”.  The  city 
reserved  the  right  to  designate  the  location  for  conduits  and 
pole  lines,  to  change  the  manner  or  place  of  setting  poles  and 
to  require  all  wrires  to  be  placed  underground. 

Another  franchise,  very  similar  to  the  one  just  described, 
was  granted  to  S.  F.  Walker,  December  22,  1893. 2  But  the 
provision  for  free  lighting  was  modified  so  as  to  include  “  the 
city  council  chamber,  city  offices,  fire  station  and  public 
library”.  It  was  also  provided  that  any  pole  tax  levied  by 
the  city  should  be  uniform  upon  this  grantee  and  all  other 

1  Book  of  Ordinances,  p.  364.  *  Ibid.,  p.  368. 


ELECTRIC  LIGHT  FRANCHISES. 


155 


persons  or  corporations  using  the  streets  for  similar  pur¬ 
poses. 

On  December  26,  1896,  Salt  Lake  City  granted  a  25-year 
franchise  to  the  Utah  Power  Company  for  the  construction 
and  maintenance  of  an  overhead  electric  system  “  for  light, 
heat,  power  and  other  industrial  and  commercial  purposes  ”.1 
It  was  provided  that  the  company  should  be  subject  to  all 
laws  and  ordinances  then  in  force  or  that  might  thereafter 
be  passed  by  the  state  legislature  or  by  the  city  council  “  au¬ 
thorizing  the  fixing  of  rates  to  be  charged  for  electricity/5 
and  also  should  be  subject  to  laws  and  ordinances  governing 
the  construction  and  maintenance  of  fixtures  and  appliances 
for  the  transmission  and  distribution  of  electricity.  It  was 
specifically  provided  that  “  all  poles  erected  under  this  fran¬ 
chise  shall  measure  forty  feet  in  length,  fourteen  inches  at 
the  butt,  ten  inches  at  the  top,  except  in  special  cases  wherein 
the  city  council  may  order  the  erection  of  larger  or  smaller 
poles;  said  poles  shall  be  set,  as  near  as  may  be,  132  feet 
apart,  and  not  less  than  five  feet  in  the  ground  ”.  All 
poles  and  their  cross-arms  were  to  be  “  properly  dressed 
and  painted  ”.  The  city  reserved  the  right,  on  four  months5 
notice  at  any  time  during  the  year  1897,  to  erect  and  main¬ 
tain  at  its  own  expense  “  a  sufficient  number  of  poles  with 
the  necessary  cross-arms  to  admit  of  lighting  the  city  with 
400  arc  lamps  ”.  The  company  was  to  provide  the  city,  free 
of  charge,  “  with  one  cross-arm  on  each  of  said  poles,  suffi¬ 
cient  for  the  proper  accommodation  of  stringing  and  support¬ 
ing  such  wires,  lamps  and  other  necessary  appliances  as  may 
be  owned  and  used  by  it  for  municipal  lighting55.  The  city 
also  reserved  the  right,  after  five  months5  notice,  at  any  time 
during  the  year  1897,  to  require  the  company  to  furnish  the 
city  for  the  period  of  three  years  “  the  equivalent  of  300  horse¬ 
power  in  electric  energy,  or  so  much  thereof  as  said  city 
may  deem  necessary  to  be  used  for  municipal  lighting;  said 
energy  shall  be  in  such  form  as  may  be  by  said  city  deter¬ 
mined  most  suitable  for  that  purpose,  and  shall  be  supplied 
continuously  and  regularly  every  night  in  the  year  between 
the  hours  of  sunset  and  sunrise,  and  shall  be  delivered  to  the 
conductors  of  the  city  street  lighting  system  within  one  block 
of  the  city  and  county  building  in  said  city,  or  such  other 

1  Book  of  Ordinances  p.  874. 


156 


MUNICIPAL  FRANCHISES. 


place  as  may  be  agreed  upon  and  shall  be  there  measured, 
and  afterwards  paid  for  monthly  by  said  city  at  the  stipu¬ 
lated  price  of  $25  per  annum,  for  each  electric  horsepower  ”. 
The  city  reserved  to  itself  the  right  to  renew  this  contract 
for  an  additional  period  of  from  one  to  three  years  at  the 
same  price,  “  or  for  any  lower  rate  at  which  said  grantee  may 
then  be  selling  electric  energy  in  quantities  of  300  horse¬ 
power  or  less  in  Salt  Lake  City  ”.  This  right  of  the  city  to 
renew  the  contract  from  time  to  time  was  to  be  continuous 
throughout  the  life  of  the  franchise.  The  company  was  re¬ 
quired  to  execute  an  idemnity  bond  of  $50,000  to  protect 
the  city  from  damages  or  expenses  growing  out  of  the  con- 
pany’s  operations.  The  following  paragraph  of  this  franchise 
is  especially  worthy  of  consideration: 

“  Said  grantee  shall  permit  any  other  electric  light,  telegraph,  tele¬ 
phone  or  power  company  to  string  wires  upon  its  said  poles,  under 
such  reasonable  regulations  and  compensation  therefor  as  may  be 
fixed  and  adopted  by  the  city  council,  and  shall  render  the  service  it  is 
hereby  authorized  to  supply,  by  the  best  available  methods  and  prac¬ 
tice  known  to  the  science  of  applied  electricity,  and  such  as  will  secure 
the  least  danger  to  life  and  property,  compatible  with  the  best  obtain¬ 
able  service;  and  said  service  must  be  supplied  on  equal  terms  under 
like  conditions,  to  every  commercial  user.” 

Still  another  franchise  was  granted  by  Salt  Lake  City, 
May  27,  1897,  to  the  Pioneer  Electric  Power  Company  for  a 
period  of  25  years.1  This  grant  was  for  pole  lines,  pipes  and 
conduits  for  the  distribution  of  both  electricity  and  gas. 
Detailed  provisions  in  regard  to  poles  were  similar  to  those 
contained  in  the  preceding  grant,  except  that  the  standard 
height  was  reduced  from  40  feet  to  35  feet,  with  a  reduction 
from  14  inches  to  12  inches  in  the  required  diameter  at  the 
butt  and  from  10  inches  to  8  inches  at  the  top.  In  addition 
to  a  free  cross-arm  on  each  of  its  poles,  the  company  was  to 
furnish  the  city  without  charge  the  equivalent  of  30  horse¬ 
power  in  electrical  energy  continuously  during  the  life  of 
the  franchise  to  be  used  for  any  municipal  purpose  the  city 
council  should  deem  necessary.  It  could  be  used  for  heat, 
light  or  power,  but  for  only  one  of  these  purposes  at  once. 
Any  additional  energy  required  for  these  purposes  w7as  to  be 
furnished  “  at  a  price  not  to  exceed  one  and  one-fourth  cents 
per  kilowatt  hour,  delivered  at  the  place  of  consumption 


1  Book  of  Ordinances,  p.  378. 


ELECTRIC  LIGHT  FRANCHISES. 


157 


The  company  was  also  required  to  furnish  arc  lighting  for 
street  purposes  at  a  price  not  to  exceed  $7  a  month  for  each 
2,000  candle  power  light  for  all-night  service.  The  max¬ 
imum  price  allowed  for  similar  lights  for  commercial  pur¬ 
poses,  was  $15  a  month.  The  maximum  price  to  be  charged 
for  16-candle  power  incandescent  lights,  for  either  public  or 
private  service,  was  not  to  exceed  “  one  cent  per  lamp  per 
ampere  hour”.  The  price  for  lighting  public  buildings, 
churches,  hospitals  and  schools,  was  not  to  exceed  “  one-half 
the  minimum  rate  charged  for  commercial  purposes  ”.  This 
franchise  contained  provisions  in  regard  to  service  and  the 
filing  of  an  indemnity  bond,  similar  to  those  of  the  preceding 
franchise. 

On  December  31,  1903,  the  city  council  passed  an  ordi¬ 
nance  for  the  benefit  of  the  Utah  Light  and  Power  Com¬ 
pany,  which  had  succeeded  to  the  franchises  of  the  Salt  Lake 
and  Ogden  Gas  and  Electric  Company,  Robert  M.  Jones, 
S.  F.  Walker  and  the  Pioneer  Electric  Company,  extending 
each  one  of  these  franchises  for  an  additional  period  of  25 
years  from  the  date  of  its  expiration.1  One  of  the  condi¬ 
tions  imposed  for  these  extensions  was  that  for  each  of  the 
first  three  franchises,  after  the  expiration  of  the  original 
period  of  25  years,  six  additional  arc  lights  should  be  fur¬ 
nished  to  the  city  free  of  charge  during  the  25-year  period 
of  the  extension,  and  for  the  fourth  franchise  seven  addi¬ 
tional  free  lights  were  to  be  given.  Another  condition  was 
that  the  transmission  wires  within  a  specified  district  should 
be  placed  underground  within  nine  years  after  January  1, 
1905.  This  ordinance  recited  that  the  Utah  Light  and 
Power  Company,  which  by  a  series  of  mesne  conveyances  had 
become  the  owner  of  the  four  franchises  referred  to,  “  is  now 
engaged  in  building  a  large  power  station  on  the  Jordan 
River  and  otherwise  improving  its  power  stations  in  Salt 
Lake  City,  and  for  that  purpose  has  issued  a  series  of  bonds, 
due  in  30  years  from  January  1,  1900”. 

The  process  of  consolidation  went  still  further  than  was 
indicated  in  the  franchise  just  described.  An  ordinance  was 
passed  by  the  city  council,  August  4,  1905,  confirming  the 
transfer  of  the  franchises  of  the  Utah  Light  and  Power 
Company,  already  summarized,  to  the  Utah  Light  and  Rail- 

1  Book  of  Ordinances,  p.  882. 


158 


MUNICIPAL  FRANCHISES. 


way  Company  and  recognized  this  company’s  control  of  the 
■  Utah  Power  Company.  This  ordinance  extended  the  life  of 
all  these  franchises  for  a  period  of  fifty  years  from  July  1, 
1905.  As  amended  December  3,  1907,  this  ordinance  ex¬ 
tended  the  time  for  commencing  the  placing  of  transmission 
wires  underground  in  the  prescribed  district  from  1905  to 
1907,  but  it  was  stipulated  that  the  work  should  be  finished 
by  the  end  of  1908.  The  city  agreed  “  that  it  will  not,  by 
ordinance  or  resolution,  make  any  rules  or  regulations  in  re¬ 
gard  to  the  price  of  lighting”  different  from  the  prices 
named  in  the  ordinance,  and  the  company  was  not  to  be 
obliged  “  to  furnish  light  for  any  one  for  less  prices,”  ex¬ 
cept  in  accordance  with  a  special  provision  of  the  ordinance 
which  I  shall  now  describe.  It  was  provided  that  “  if  there 
shall  hereafter  be  any  new  inventions  or  improvements  that 
will  materially  reduce  the  cost  of  producing  or  distributing 
either  gas  or  electric  energy  for  lighting  or  heating  pur¬ 
poses  ”,  or  “  if  there  shall  hereafter  be  any  conditions  which 
shall  materially  enhance  the  cost  of  producing  or  distribu¬ 
ting  either  gas  or  electrical  energy  for  lighting  or  heating 
purposes  ”,  then  “  in  either  event  there  shall  be  a  reasonable 
readjustment”  of  the  rates.  In  case  of  disagreement  be¬ 
tween  the  city  and  the  company  in  regard  to  any  such  re¬ 
adjustment,  each  party  was  to  appoint  an  appraiser,  and  in 
case  these  two  could  not  agree  they  were  to  refer  their  dif¬ 
ferences  to  an  umpire  selected  by  them,  and  the  written  de¬ 
cision  of  any  two  of  the  three  was  to  be  binding.  The 
expenses  of  the  appraisal  were  to  be  borne  by  the  city  and 
the  company,  share  and  share  alike.  If  the  company  refused 
to  take  part  in  an  arbitration  when  requested  by  the  city  to 
do  so,  then  the  city  was  to  regain  the  right  to  change  the 
rates  by  amending  the  ordinance.  The  company  agreed 
during  the  life  of  the  franchise  to  furnish  the  city  for 
street  lighting  purposes,  under  contracts  for  not  less 
than  three-year  periods,  arc  lights  giving  “  an  average  il¬ 
lumination  of  not  less  than  the  present  standard  of  455  watt 
inclosed  arc  lamps,  all-night  service,  at  a  price  not  to  ex¬ 
ceed  $5.00  per  month  ”.  The  meter  rates  to  private  con¬ 
sumers  fixed  in  the  ordinance  of  Aug.  4,  1905,  were  12  cents 
per  kilowatt  hour  for  electricity  used  in  arc  lighting,  in  ad¬ 
dition  to  $1.50  a  month  for  each  arc  light;  and  for  incandes- 


ELECTRIC  LIGHT  FRANCHISES. 


159 


cent  lighting  11  cents  per  kilowatt  hour  with  a  minimum 
charge  of  $1  per  month.  Customers  paying  within  the  first 
seven  days  of  the  month  for  electricity  used  the  preceding 
month  were  to  get  a  discount  of  10%,  but  no  monthly  bill 
was  to  be  reduced  below  $1.  The  company  agreed  to  furnish 
the  city,  free  of  charge  throughout  the  life  of  the  franchises, 
52  incandescent  lamps  of  32  candle  power  each,  for  the  pur¬ 
pose  of  lighting  the  city’s  portion  of  the  public  square,  and 
also  to  furnish  free  “  all  the  reasonably  necessary  light  ”  for 
use  in  the  public  buildings  enumerated  in  the  ordinance.1 

After  the  acquisition  by  the  Utah  Railway  and  Light 
Company  of  the  various  electric  light  franchises  heretofore 
described,  a  new  franchise  was  granted  by  ordinance  of  the 
city  council  approved  May  22,  1906,  to  J.  S.  Manley  and  L. 
H.  Curtis.  The  grantees  were  authorized  to  erect  and  main¬ 
tain  such  poles,  wires  and  conduits  and  other  structures  “  as 
may  be  necessary  for  the  transmission  and  utilization  of 
electric  energy,  and  the  operation  and  maintenance  of  electric 
wires  or  lines  and  the  furnishing  of  electric  current  for  light, 
heat  and  power,  or  any  other  purpose  to  which  the  same  is, 
or  may  be,  adapted,  within  the  limits  of  said  city,  for  public 
or  private  use  ”.  The  grantees  were  to  pay  1%  of  their  gross 
receipts  into  the  city  treasury  for  the  first  five  years  of  the 
grant;  1  1-2%  for  the  next  five  years,  and  2%  during  the  re¬ 
maining  period  of  the  franchise,  which  was  granted  for  fifty 
years.  It  was  provided,  however,  that  no  matter  what  sums 
the  percentages  fixed  should  amount  to,  the  payments  of  the 
grantees  should  not  be  less  than  $1000  for  the  first  year; 
$2000  for  the  second  year  and  $3000  a  year  thereafter.  The 
grantees  also  agreed  to  furnish  the  city,  on  a  three-year  con¬ 
tract  for  public  lighting,  as  many  455  watt  inclosed  carbon 
arc  lights  of  standard  efficiency  as  the  city  might  desire  at 
a  rate  of  not  more  than  $65  per  light  per  annum,  and  also 
to  furnish  the  city,  for  power  purposes  only,  100  horsepower 
of  electric  energy  at  a  rate  of  not  more  than  1  cent  per  kilowatt 
hour  on  a  24-hour  service.  Arc  lighting  rates  to  private 
consumers  were  fixed  at  $10  per  month  for  each  standard 
arc  lamp  on  all-night  service;  $6,50  on  midnight  service,  and 
$5  on  10  o’clock  service,  or  by  meter  at  the  rate  of  11  cents 


1  The  original  ordinance  of  Aug.  4, 1905,  and  the  amending  ordinance  of  Dec.  3, 
1907,  were  furnished  to  the  writer  on  printed  slips  by  the  city  recorder. 


160 


MUNICIPAL  FRANCHISES. 


per  kilowatt  hour,  and  an  additional  charge  of  $1  per  lamp 
per  month  for  care  and  maintenance.  For  incandescent 
lighting  a  meter  rate  of  10  cents  per  kilowatt  hour  was  fixed 
with  a  minimum  charge  of  75  cents  a  month  for  each  consumer. 
The  standard  of  efficiency  was  fixed  at  from  3  to  3  6-10  watts 
per  candlepower.  The  power  rate  was  fixed  at  a  maximum  of 
8  cents  per  kilowatt  with  a  minimum  charge  of  $3  a  month  for 
each  consumer.  All  consumers  paying  on  or  before  the  tenth 
day  of  each  month  for  the  electricity  used  in  the  preceding 
month  were  to  have  a  discount  of  10%  from  these  rates,  but  no 
individual  bill  was  to  be  less  than  a  minimum  of  75  cents  a 
month.  The  city  reserved  the  right  to  use  without  cost  all  of 
the  grantee’s  poles  or  conduits  for  the  purpose  of  stringing  or 
laying  necessary  wires  for  use  in  the  police  or  fire  alarm  sys¬ 
tems,  or  for  any  other  municipal  purpose  excepting  light  and 
power.  It  was  stipulated,  however,  that  these  city  wires 
should  not  interfere  with  the  proper  and  reasonable  use  of 
the  poles  or  conduits  for  the  wires  belonging  to  the  grantees. 
It  was  agreed  that  the  grantees  should  place  all  their  wires 
underground  within  the  paved  district  and  extend  the  under¬ 
ground  system  in  advance  of  paving  as  fast  as  additional 
streets  were  to  be  improved.  The  franchise  was  not  to  be 
assignable  except  to  a  corporation  organized  under  the  laws 
of  Utah  or  by  way  of  pledge,  mortgage  or  trust  deed.  It  was 
expressly  provided  that  in  case  the  franchise  was  purchased 
under  foreclosure  proceedings  it  should  be  transferred  within 
one  year  thereafter  to  a  Utah  corporation.  In  case  the 
grantees  or  the  corporation  to  which  the  franchise  was  as¬ 
signed,  after  constructing  and  putting  in  operation  the  elec¬ 
tric  light  and  power  plant  and  distributing  system,  should 
desire  to  sell  or  assign  it,  in  that  event  the  franchise  was  to 
be  non-transferable  without  the  consent  of  the  city  “  except 
after  said  corporation  shall  have  offered  to  sell  its  entire 
property  and  privileges  to  said  city  at  a  valuation  that  would 
be  equal  to  that  offered  by  any  bona  fide  purchaser  for  the 
same,  or  at  such  a  price  as  the  property  of  said  corporation 
would  sell  for  in  the  open  market  at  the  time  said  corporation 
should  make  such  proposal  of  sale  of  its  entire  property  and 
privileges  ”.  The  grantees  were  required  to  give  a  bond  in  the 
sum  of  $25,000,  or  deposit  a  like  amount  in  cash,  to  guaran¬ 
tee  the  commencement  of  wrork  under  the  franchise  within 


ELECTRIC  LIGHT  FRANCHISES. 


161 


four  months  after  its  acceptance,  and  the  continuance  of  the 
work  of  installation  with  reasonable  diligence,  and  also  to 
guarantee  that  they  would  live  up  to  the  terms  and  conditions 
of  the  ordinance.  The  ordinance  was  to  be  accepted  within 
sixty  days  after  its  passage  unless  the  grantees  should  be 
prevented  from  accepting  it  by  injunction  or  other  legal  pro¬ 
cess.  In  that  case  they  were  to  have  sixty  days  after  the 
obstacles  to  the  acceptance  had  been  cleared  away,  but  in  no 
case  was  the  franchise  to  live  longer  than  one  year  from  the 
date  of  its  passage  and  publication  unless  accepted  within  that 
time. 

116.  Revocable  grant;  free  lighting;  painting  of  poles; 
right  to  purchase  plant— Duluth. — By  an  ordinance  pub¬ 
lished  July  25,  1888,  and  amended  in  the  following  year,  the 
common  council  of  Duluth  granted  a  franchise  to  the  Duluth 
Electric  Company,  its  successors  and  assigns,  for  the  main¬ 
tenance  of  pole  lines  on  certain  specified  streets  for  use  in 
the  transmission  of  electric  current  for  light  and  power.1 
The  city  expressly  reserved  the  right  to  amend  the  ordinance 
“  at  any  time  after  the  expiration  of  ten  years  from  the  first 
day  of  August,  1889,  and  to  revoke  or  annul  the  same  at  any 
time  after  the  expiration  of  fifteen  years  from  the  first  day 
of  August,  1889  ”.  It  was  stipulated  that  the  ordinance 
should  not  be  construed  as  granting  an  exclusive  franchise, 
and  that  any  other  company  desiring  to  use  the  grantee’s 
poles  for  transmitting  electric  currents,  should  have  the 
right  to  do  so  on  condition  that  it  should  not  interfere  with 
the  grantee’s  system  and  should  pay  to  the  grantee  annually 
15  per  cent  of  the  cost  of  the  poles  and  their  erection  and  in 
addition  assume  one-half  the  expense  of  their  maintenance. 
The  grantee  was  required  to  furnish  any  such  company  de¬ 
siring  to  use  its  poles  “  a  sworn  statement  showing  the  actual 
cost  of  such  poles,  including  painting,  setting,  etc.”,  this 
statement  to  be  verified  by  the  grantee’s  secretary  and  man¬ 
ager.  Poles  used  by  the  company  were  to  be  at  least  ten 
inches  in  diameter  at  the  bottom,  not  less  than  seven  inches 
at  the  top  and  at  least  thirty  feet  in  length  above  ground. 
They  were  to  be  “  peeled  of  all  bark,  and,  where  set  on  streets 
or  avenues,  said  poles  shall  be  planed  smooth  and  be  painted 

1  Book  of  Ordinances,  p.  256. 

I 


162 


MUNICIPAL  FRANCHISES. 


red  to  a  height  of  twelve  feet  above  the  ground,  from  which 
point  to  the  top  they  shall  be  painted  white,  the  said  painting 
to  consist  of  at  least  two  good  coats,  and  the  same  to  be  re¬ 
newed  once  each  two  years  The  grantee  was  required  “  to 
furnish  the  said  electric  system  or  such  parts  thereof  as  may 
be  put  in  use  by  it  under  the  provisions  of  this  ordinance  at 
reasonable  prices,  the  same  to  be  consistent  with  charges  else¬ 
where  where  such  system  may  be  in  working  order  ”.  Another 
provision  of  the  ordinance  required  the  grantee  to  supply  “  a 
suitable  and  sufficient  electric  light  *  *  *  *  free  of  all  cost 
to  said  city  for  the  purpose  of  lighting  the  city  hall  of  said 
city,  for  and  during  the  full  life  of  said  company,  its  suces- 
sors  and  assigns,  and  to  furnish  all  apparatus  therefor 
Provision  was  also  made  for  a  free  light  “  for  each  public 
or  private  park,  improved  and  known  and  set  apart  and  used 
as  such  ”,  the  light  to  be  furnished  from  8  p.  M.  to  3  A.  m. 
every  night  in  the  year.  The  ordinance  prescribed  a  fine  of 
from  $25  to  $100,  or  imprisonment  of  from  10  to  30  days,  as 
a  penalty  upon  any  person  who  should  maliciously  interfere 
with  any  part  of  the  company’s  equipment.  The  city  re¬ 
served  the  right  to  have  the  first  option  for  purchasing  the 
property  and  privileges  of  the  company  at  any  time  after  15 
years  from  the  commencement  of  the  grant,  at  a  price  to  be 
agreed  upon  by  three  disinterested  persons. 

The  City  of  Duluth  granted  another  interesting  franchise 
in  1903  to  the  Great  Northern  Power  Company.1  This  com¬ 
pany  was  given  the  right  to  bring  water  through  a  canal,  a 
reservoir  and  pipe  lines  from  the  northern  city  limits  to  the 
bay  and  to  construct  and  maintain  pole  lines  and  conduits  for 
the  distribution  of  electrical  energy  generated  by  the  water 
power  thus  developed.  In  the  provision  of  this  franchise  re¬ 
quiring  that  the  company  should  indemnify  the  city  for  all 
damages  resulting  from  operations  under  the  grant,  it  w7as 
stipulated  that  the  city  should  “  have  a  preferred  lien  upon 
the  plant  and  property  of  said  company  to  secure  payment  of 
any  claim  existing  in  favor  of  the  City  of  Duluth  against  said 
company  ”.  The  term  of  the  franchise  was  fixed  at  25  years, 
and  the  maximum  rate  to  be  charged  consumers  wdthin  the 
city  for  water  or  electric  power  was  limited  to  five  cents  per 
horsepower  per  hour ;  and  the  rate  for  electric  lighting  was 

1  Book  of  Ordinances,  p.  363. 


ELECTRIC  LIGHT  FRANCHISES. 


163 


limited  to  12  cents  per  kilowatt  hour.  Provision  was  also 
made  for  maximum  flat  rates  for  power  users.  The  company 
was  forbidden  to  furnish  light  or  power  “  generated  in  whole 
or  in  part  by  means  of  the  plant  constructed  by  virtue  of  this 
franchise  ”  at  a  lower  rate  for  use  outside  of  the  city  than  the 
rate  charged  to  consumers  within  the  city.  The  company  also 
agreed  to  have  available  at  all  times  “  at  least  three  times  as 
much  power  for  power  purposes  in  the  City  of  Duluth  as  is 
furnished  for  lighting  purposes  in  the  City  of  Duluth  ”.  The 
granting  of  any  rebate  or  any  discrimination  by  the  company 
in  favor  of  any  person  or  corporation  competing  with  the  city 
in  furnishing  light  for  the  general  use  of  its  citizens,  was  to 
constitute  sufficient  ground  for  the  forfeiture  of  the  franchise, 
“  and  to  prevent  such  rebate  or  discrimination,  the  books, 
papers,  contracts,  meters  and  recorders  of  said  company,  its 
successors  and  assigns,  shall  be  open  at  all  reasonable  times 
to  examination  and  inspection  by  any  authorized  agent  or 
committee  appointed  by  the  common  council  of  the  City  of 
Duluth  ”.  The  city  reserved  the  right  to  purchase,  at  any 
time  after  five  years  from  the  commencement  of  operation  by 
the  company,  any  portion  of  the  company’s  plant  constructed 
under  the  authority  of  this  ordinance  and  in  use  at  the  time 
for  electric  lighting  purposes,  at  a  price  to  be  determined  by 
arbitration.  It  was  provided  that  “  in  determining  the  value 
to  be  paid  for  such  lighting  plant  and  appliances  upon  such 
purchase,  or  upon  condemnation,  the  franchise  of  said  com¬ 
pany  shall  not  at  any  time  be  taken  into  consideration.  Nor 
shall  such  value  exceed  the  cost  of  duplication  at  said  time 
of  such  portion  of  said  plant  to  be  so  purchased,  and  ten  (10) 
per  cent  of  such  cost  added  thereto  ”.  The  city  also  reserved 
the  right  to  purchase  that  portion  of  the  company’s  plant  used 
exclusively  for  distributing  electricity  for  lighting  purposes  at 
any  time  during  the  life  of  the  franchise  when  the  city  was 
ready  to  enter  into  a  contract  with  the  company  to  take  power 
for  operating  a  lighting  plant.  Any  such  contract  was  to  be 
for  a  period  of  not  less  than  five  years,  and  the  price  paid  by 
the  city  for  power  furnished  was  to  be  “  not  more  than  the 
lowest  price  that  is  charged  at  the  time  to  any  other  consumer 
for  a  like  amount  of  power  under  similar  circumstances  ”.  In 
regard  to  the  right  of  private  consumers,  the  franchise  stipu¬ 
lated  that  the  company  should  “  build  a  line  for  the  transmis- 


164 


MUNICIPAL  FRANCHISES. 


sion  of  power  to  any  place  within  the  limits  of  the  City  of 
Duluth,  upon  a  demand  being  made  therefor  by  anyone  agree¬ 
ing  to  use  a  reasonable  amount  of  power  under  the  circum¬ 
stances  ”. 

117.  Joint  use  of  poles  and  conduits;  mechanical  gong 
in  connection  with  fires— Richmond,  Va. — Under  a  30-year 
franchise  granted  December  23,  1897,  to  the  Virginia  Elec¬ 
tric  Company  of  Baltimore  City,  the  council  of  Richmond 
provided  that  all  conduits  constructed  by  the  company  should 
be  built  with  a  capacity  at  least  15  per  cent  larger  than  the 
the  company  or  companies  then  to  use  them  should  require, 
and  the  man-holes  should  be  at  least  30  per  cent  larger  than 
required  for  immediate  use.1  The  city  reserved  the  right  to 
authorize  the  use  of  these  conduits  and  man-holes  by  other 
companies  upon  terms  to  be  fixed  by  agreement  or  arbitration. 

In  a  power  franchise  granted  June  30,  1890,  to  R.  W. 
Traylor, 2  the  city  reserved  to  itself  the  right  “  to  require  at 
any  time,  by  ordinance  or  resolution,  that  the  use  of  electricity 
for  furnishing  power  by  said  R.  W.  Traylor  shall  cease  ”,  and 
in  that  event  he  was  to  proceed  immediately  “  to  remove  from 
the  streets  all  lines,  poles  and  other  apparatus  ”  used  by  him 
for  the  transmission  of  power  and  restore  the  streets  to  their 
former  condition.  Authority  was  reserved  to  the  officials  of 
the  fire  alarm  and  police  telegraph  departments  to  cut  the 
grantee’s  wires  whenever  it  was  deemed  necessary  for  the  pro¬ 
tection  of  the  city’s  interests,  and  to  use  the  grantee’s  poles, 
without  compensation,  for  the  wires  of  those  departments.  The 
grantee  was  required  to  keep  in  his  power  station  “  an  electric 
mechanical  gong,  the  same  to  be  connected  with  the  City  fire 
alarm  service,  to  be  used  for  transmitting  signals  when  it 
becomes  necessary  to  have  the  current  cut  off  the  wires  of  the 
said  R.  W.  Traylor  during  the  progress  of  a  fire  ”,  and 
immediately  upon  receiving  such  a  signal  the  grantee  was  to 
cut  off  the  current,  and  leave  it  off  until  notified  by  the 
proper  official  that  he  might  turn  it  on  again. 

In  a  franchise  granted  April  21,  1891,  to  the  Traylor 
Electric  Company,  similar  provisions  were  inserted,  with  the 
additional  stipulation  that  whenever  the  city  should  construct 
and  operate  its  own  electric  light  plant,  the  franchise  should 

1  “  Franchises  Granted  by  the  City  Council  ”,  to  Dec.  81,  1899,  p.  220. 

*  Ibid.,  p.  283. 


ELECTRIC  LIGHT  FRANCHISES.  165 

be  terminated  and  the  grantee  should  remove  its  equipment 
from  the  streets  immediately.1 

Both  Traylor  franchises  were  superseded  January  17,  1898, 
by  a  franchise  granted  to  the  Home  Electric  Company,  which 
was  to  run  for  a  period  of  30  years  and  was  not  revocable. 
A  new  feature  of  this  grant  was  the  provision  that  the  city 
might  require  the  company,  after  the  expiration  of  five  years, 
to  remove  its  poles  and  wires  from  the  streets  and  to  run 
its  wires  in  conduits  within  the  limits  of  a  prescribed  territory, 
and  to  place  its  fixtures  underground  outside  of  these  limits 
after  the  expiration  of  six  years.  But  the  city  was  not 
permitted  to  require  such  further  underground  construction 
more  rapidly  than  an  average  of  “  two  squares  ”  per  year. 

118.  No  discrimination;  union  labor;  right  to  inspect 
books  —  Nashville. — The  original  franchise  granted  by  the 
City  of  Nashville  to  the  Cumberland  Electric  Light  and 
Power  Company,  April  4,  1893,  authorized  the  company  to 
furnish  the  city  and  its  citizens  with  electric  light  and  heat, 
“  and  also  power  produced  by  electricity  for  operating 
machinery  and  electric  railways  'b2  If,  in  the  judgment  of 
the  Board  of  Public  Works  and  Affairs,  there  were  any  streets 
on  which  as  many  poles  had  already  been  erected  as  public 
welfare  would  permit,  this  company  was  required  to  make 
such  other  arrangements  for  stringing  its  wires,  subject  to  the 
approval  of  the  Board,  as  to  prevent  the  erection  of  additional 
poles  in  these  places.  The  company  was  bound  to  furnish  the 
city  authorities  “  a  complete  and  correct  statement  of  the 
number  and  location  of  any  and  all  poles,  wires,  circuits,  or 
system  of  wires,  and  a  map  thereof,  whenever  required,  that 
said  company  may  have  erected  or  in  operation;  also  the 
number  and  location  of  all  lamps,  motors,  or  other  appliances, 
that  may  be  connected  to  or  in  operation  from  such  wires  or 
circuits  ?b  It  was  provided  that  “  in  hanging  and  adjusting 
and  connecting  the  wires,  every  proper  precaution  shall  be 
taken  to  prevent  accident  to  person  and  property,  and,  to  this 
end,  no  wire  shall  be  so  placed  as  to  interfere  with  or  touch  the 
various  wires  that  are  now  or  may  hereafter  be  used  by  the  city, 
or  the  wires  of  any  other  company  or  companies  that  are  now 
or  may  hereafter  be  erected  and  maintained  in  a  legal  and  law- 

1  Franchises  granted  by  the  City  Council  ”,  op.  cit.  p.  243. 

2  Laws  of  Nashville,  1908,  p.  1004. 


166 


MUNICIPAL  FRANCHISES. 


ful  manner”.  The  Board  of  Public  Works  and  Affairs  was 
authorized  to  require  the  company  to  remove,  reset,  or  change, 
any  pole,  wire  or  other  fixture,  whenever  such  action  was 
deemed  necessary.  The  right  was  reserved  to  the  city  to 
grant  any  other  company  or  companies  having  authority  to 
erect  wires  in  the  streets,  the  right  to  use  this  company’s 
poles ;  but  the  company  was  not  required  “  to  permit  the  use 
of  its  poles  or  fixtures  for  the  purpose  of  furnishing  currents 
for  electric  lighting  and  power  in  competition  ”  with  itself, 
unless,  in  the  judgment  of  the  city  authorities,  there  were 
already  enough  poles  in  the  streets.  For  the  use  of  its 
poles  and  fixtures  the  company  was  to  receive  a  reasonable 
compensation,  which  in  case  of  disagreement  between  the 
parties  interested  was  to  be  fixed  by  the  Board  of  Public 
Works  and  Affairs.  The  company  was  required  to  keep  its 
principal  office  for  the  transaction  of  business  within  the  cor¬ 
porate  limits  of  the  city,  on  pain  of  forfeiture  of  its  franchise. 
The  poles  erected  under  this  grant  were  to  be  painted  such 
color  as  the  city  authorities  might  select  and  were  to  be  kept 
at  all  times  “  reasonably  clean  ”.  In  regard  to  rates  it  was 
stipulated  that  the  company  “  shall  furnish  light,  power  or 
heat,  or  light,  and  power  and  heat,  upon  application,  to  all  its 
customers  and  patrons  (other  than  the  city)  under  like  con¬ 
ditions  and  circumstances,  at  a  fixed  and  uniform  price,  and 
shall  not  impose  terms  upon  or  exact  prices  from  any  one 
customer  or  patron  which  are  not  imposed  upon  or  exacted 
from  any  and  all  other  customers  and  patrons  ”.  It  was  also 
stipulated  that  the  company  should  not  “  require  any  cus¬ 
tomer  or  patron,  or  proposed  customer  or  patron,  to  use  any 
particular  appliance,  implement,  fixture,  machine  or  other 
device,  or  to  obtain  the  same  from  any  particular  manu¬ 
facturer  or  vendor  ”.  It  was  further  stipulated  that  the  com¬ 
pany  should  make  a  contract  with  the  city  for  the  period  of 
five  years  to  furnish  “  steady  burning  all-night  electric  arc 
lights  of  2,000  standard  candle  power  each — that  is,  an  arc 
light  consuming  not  less  than  450  volts  of  electrical  energy — 
erected  and  maintained  in  such  manner  and  at  such  points 
within  the  city’s  limits  as  the  Board  of  Public  Works  and 
Affairs  may,  in  writing,  designate,  at  and  for  a  price  not  to 
exceed  26  cents  per  light  per  night  ”. 

This  ordinance  was  amended  May  28,  1896,  so  as  to  require 


ELECTRIC  LIGHT  FRANCHISES. 


167 


the  company  to  furnish  public  arc  lights  at  annual  prices  ar¬ 
ranged  on  a  sliding  scale,  from  $91.25  each  for  300  lights  to 
$75  each  for  1,000  or  more.1  The  company  was  also  required 
to  furnish  the  city,  free  of  charge,  current  for  50  sixteen- 
candle  power  incandescent  lights  for  use  in  the  city  offices 
and  market  houses,  and  other  incandescent  lighting  required 
for  public  buildings  at  one-half  the  rates  charged  to  private 
consumers.  The  city  reserved  the  right,  at  any  time  after 
June  1,  1901,  to  terminate  the  lighting  contract  by  purchasing 
that  part  of  the  company’s  property  in  use  for  city  lighting 
“  at  a  fair  and  reasonable  valuation  ”,  the  value  of  the  fran¬ 
chise  not  to  be  considered.  If  the  city  did  not  care  to  pur¬ 
chase  the  plant,  the  right  was  reserved  to  have  arbitrators 
appointed  at  the  expiration  of  five  years  and  again  at  the 
expiration  of  seven  years,  from  the  date  of  the  contract,  to 
decide  “  whether  or  not  the  price  of  lights  furnished  under 
this  contract  shall  be  reduced  on  account  of  any  discovery, 
invention,  or  advance  in  the  art  of  electric  lighting,  or  the 
cost  of  fuel  which  at  that  time  shall  have  reduced  the  cost 
of  producing  electric  lights This  ordinance  also  fixed 
maximum  rates  to  be  charged  for  arc  and  incandescent  light¬ 
ing  and  electric  power  furnished  to  private  consumers. 

Another  franchise  in  some  respects  even  more  interesting, 
was  granted  by  the  City  of  Nashville,  July  18,  1902,  to  the 
Great  Falls  Power  Company  for  the  period  of  35  years.2 
Under  this  ordinance  the  company  was  given  “  the  right  of 
way  ”  in  the  streets  of  the  city  for  the  purpose  of  furnishing 
“  electric  energy  for  the  operation  of  lamps,  motors  and  heat¬ 
ing  apparatus  and  for  all  other  uses  and  purposes  to  which 
electric  energy  is  now,  or  may  hereafter  be  applied  *In  this 
grant  the  city  reserved  the  right  to  run  wires  on  the  company’s 
poles  without  compensation  to  the  company  and  to  occupy,  if 
it  desired,  the  topmost  position  on  the  poles;  but  it  was  not 
to  string  the  city’s  wires  on  these  poles  “  for  transmitting 
electric  energy  to  private  consumers,  without  paying  to  the 
Great  Falls  Power  Company  a  fair  and  reasonable  compensa¬ 
tion  for  such  use  ”.  It  was  provided  that  the  company  should 
furnish  electric  energy  to  all  its  customers  similarly  situated, 
other  than  the  city,  at  a  uniform  price,  which  should  not 

1  Laws  of  NaRhville,  1908,  p.  1015. 

*  Ibid.,  p.  1036. 


168 


MUNICIPAL  FRANCHISES. 


exceed,  to  private  consumers,  7  cents  per  kilowatt  hour  for  3 
hours  daily  use,  and  2J  cents  per  kilowatt  hour  for  10  hours 
daily  use;  and  to  the  City  of  Nashville,  $45  per  year  for  each 
arc  light  of  450  watts  for  all-night  service.  It  was  stipulated 
that  the  company  should  “  not  discriminate  among  its  cus¬ 
tomers  similarly  situated,  in  any  way,  directly  or  indirectly,  in 
the  price  to  be  charged  for  energy  or  in  any  special  terms  or 
conditions  imposed  upon  any  customers  to  the  exclusion  of 
other  customers  similarly  situated  ”.  The  company  agreed  to 
pay  to  the  city,  in  lieu  of  all  taxes  except  ad  valorem  taxes, 
an  amount  equal  to  2  per  cent  annually  upon  the  first 
$50,000  of  its  gross  receipts,  and  3  per  cent  on  all  over 
$50,000,  derived  from  the  sale  of  its  electric  energy  within  the 
corporate  limits  of  the  city. 

It  was  stipulated  that  “  no  convict  labor  shall  be  used  by 
said  company  or  any  person,  company  or  corporation  working 
for  them,  in  any  part  of  their  work;  nor  shall  said  company 
use  any  material  that  is  the  product  of  convict  labor  ”.  It 
was  also  stipulated  that  “  none  but  union  labor  shall  be 
employed  in  the  construction  and  maintenance  of  said  com¬ 
pany’s  plant  ”. 

The  city  reserved  the  right  “to  purchase  the  plant  con¬ 
structed  or  acquired  by  said  company,  embracing  every 
appliance  thereof,  for  the  manufacture  and  furnishing  of 
electric  energy  ”,  at  any  time  after  20  years,  upon  giving  12 
months’  notice.  The  price  to  he  paid  was  to  be  based  on  a 
fair  valuation  arrived  at  by  arbitration;  but  it  was  expressly 
agreed  that  any  such  sale  by  the  company  should  be  con¬ 
strued  as  a  voluntary  surrender  of  its  franchise,  “  and  the 
same  shall  not  be  valued,  but  the  arbitrators  shall  value  the 
plant  and  appliances  aforesaid  as  a  plant  in  actual  operation, 
the  right  to  the  immediate  operation  of  which  will  vest  upon 
the  completion  of  the  sale  exclusively  in  the  Mayor  and  City 
Council  of  Nashville”.  The  company  was  also  required  to 
file  with  the  city  every  year  a  sworn  statement  of  the  annual 
report  made  by  its  officers  to  its  stockholders,  “  and  the  City 
Recorder  or  some  expert  to  be  designated  by  the  Mayor  and 
City  Council  shall  have  the  right  at  all  times  to  examine  the 
books  and  accounts  of  the  Great  Falls  Power  Company  and 
make  his  report  thereon  to  the  Mayor  and  City  Council  ”. 
This  franchise  was  subject  to  acceptance  by  the  company  and 


ELECTRIC  LIGHT  FRANCHISES. 


169 


approval  by  the  electors  of  the  city  at  the  general  election  held 
August  7,  1902. 

119.  Extensions  on  petition ;  power  and  heat  for  city 
buildings  at  cost;  schedule  of  rates.— Rockford,  Ill. — A 

franchise  granted  December  4,  1882,  to  the  Rockford  Elec¬ 
tric  Light  and  Power  Company,  authorizing  the  maintenance 
of  poles,  wires  and  other  electrical  apparatus  for  lighting 
purposes,  reserved  to  the  city  “  the  right  to  order  a  discon¬ 
tinuation  of  the  use  of  such  poles,  apparatus  and  wires,  and 
the  use  of  electric  light  produced  by  said  company,  its  succes¬ 
sors  and  assigns,  within  the  limits  of  said  city,  whenever, 
in  the  judgment  of  its  Council,  the  public  interest  requires 
the  discontinuation  of  such  use.”  1 

By  an  ordinance  granted  February  6,  1899,  to  the  Rock¬ 
ford  General  Electric  Company,  the  company  was  permitted 
“  to  lay,  operate  and  maintain  an  underground  system  of 
wires  under  or  over  or  above  the  highways,  streets,  alleys, 
avenues,  bridges,  parks  and  public  grounds,  now  or  hereafter 
dedicated  to  public  use,  and  under  sidewalks,  together  with 
the  necessary  feeders,  service  wires  and  conductors,  within 
or  without  the  corporate  limits  of  the  City  of  Rockford,  to  be 
used  for  the  production,  transmission  and  distribution  of 
electricity  for  the  purpose  of  furnishing  light,  heat,  motive 
power,  and  other  proper  purposes  ”.2  The  company  was  not 
permitted,  however,  to  enter  upon  any  additional  streets  or 
public  places  not  already  occupied  by  it,  without  first  obtain¬ 
ing,  “  in  each  instance,  express  authority  and  permission  for 
the  specific  work  proposed  of  the  city  council,  or  such  officer 
of  said  city  as  the  city  council  may  from  time  to  time 
designate  ”.  The  company  was  made  liable  for  damage  to 
sewer,  water  or  gas  pipes,  caused  by  leakage  of  current  from 
its  wires.  It  was  also  stipulated  that  the  company  “  shall 
charge  only  reasonable  and  fair  prices  for  light,  heat  and 
power,  and  shall  be  governed  by  the  prices  charged  for  like 
services  in  cities  of  equal  size  in  the  State  of  Illinois  ”.  The 
company  agreed  to  furnish  incandescent  lighting  for  the  city 
offices,  public  library,  fire  stations,  police  stations,  city  jail 
and  water  works  at  60  per  cent  discount  from  the  established 
rates,  “  during  the  lifetime  of  the  franchise  ”,  or  so  long  as  no 

1  Revised  Ordinances,  City  of  Rockford,  1903,  p.  301. 

*  Ibid.,  p.  309. 


170 


MUNICIPAL  FRANCHISES. 


other  company  was  granted  a  franchise  to  furnish  electric 
light  and  power  “  for  lesser  consideration  or  upon  more 
favorable  terms  39 .  It  was  expressly  stated  that  “  the  rights 
and  privileges  hereby  granted  shall,  at  the  expiration  of  thirty 
years  from  the  passage  of  this  ordinance,  absolutely  cease  and 
determine,  it  being  the  true  meaning  and  intent  of  this 
ordinance  to  grant  the  said  rights  and  privileges  only  for  the 
term  of  thirty  years  from  its  passage 

This  ordinance  was  amended  in  several  particulars  in  1908 
and  its  term  extended  to  July  1,  1958. 1  By  this  amendment 
the  section  of  the  ordinance  providing  for  extensions  was 
changed  so  as  to  give  the  company  the  right  to  enter  upon 
additional  streets  “  whenever  it  shall  present  to  the  city 
council  of  said  city  proper  and  legal  petition  or  petitions  of 
the  owners  of  land  representing  more  than  one-half  of  the 
frontage  upon  such  additional  streets  or  the  portions  thereof 
whereon  such  poles  and  equipments  are  proposed  to  be  erected 
and  constructed  ”.  The  section  referring  to  charges  was 
amended  and  definite  maximum  rates  established.  For  elec¬ 
tric  current  furnished  for  power  purposes,  the  company  was 
not  to  charge  more  than  eight  cents  per  horsepower  per  hour, 
with  the  minimum  guaranteed  charge  of  $3  per  month.  This 
power  rate  was  not  to  be  subject  to  discount.  The  rates  for 
commercial  lighting  were  arranged  according  to  a  sliding 
scale  and  varied  from  13 l/z  cents  per  kilowatt  hour,  with  a 
monthly  minimum  of  50  cents,  to  8  cents  per  kilowatt  hour, 
with  a  monthly  minimum  of  $20,  these  prices  being  subject 
to  a  10  per  cent  discount  for  payment  of  bills  within  ten  days 
from  the  date  of  their  presentation.  The  company  agreed  to 
pay  to  the  city  2  per  cent  of  its  annual  gross  receipts  from 
commercial  lighting  over  and  above  $94,000,  on  condition 
that  if  any  other  company  should  in  the  future  be  required  to 
pay  less,  this  percentage  should  be  proportionally  reduced. 

A  heating  and  power  franchise  was  granted  by  the  City  of 
Rockford,  July  21,  1902,  to  certain  individuals  for  the  period 
of  25  years.2  The  grantees  agreed  to  use  on  their  plant  “  the 
most  approved  form  of  smoke  consumer  or  consumers 
wherever  and  whenever  smoke  is  produced  in  the  operation  of 

1  Typewritten  copy  of  the  amending  ordinance,  without  the  exact  date  of  its 
passage,  was  furnished  to  the  author  by  the  Mayor  of  Rockford,  Oct.  23,  1908. 

2  Revised  Ordinances,  City  of  Rockford,  1903,  p.  814.  This  grant  was  made  to 
J.  A.  Walker,  Fred  K.  Houston  and  Geo.  S.  Briggs. 


ELECTRIC  LIGHT  FRANCHISES. 


171 


said  plant  ”.  They  also  agreed  to  furnish  the  city  any  heat  or 
power  it  might  desire  for  any  municipal  buildings  or  plant 
within  their  district  “  at  absolute  cost  ”.  This  franchise  was 
amended  on  October  28,  1902,  so  as  to  include  the  right  to 
distribute  electricity  for  lighting.1  The  grantees  were  re¬ 
quired  to  furnish  incandescent  lights  for  public  buildings 
“  at  60  per  cent  discount  from  the  established  rate  in  use  by 
other  companies  or  persons  furnishing  lights  in  said  city  ”. 
They  also  were  bound  upon  one  year’s  notice,  at  the  expiration 
of  the  city’s  street  lighting  contract,  to  furnish  the  city,  if 
it  desired,  2,000  candle-power  arc  lights  at  the  rate  of  $52  per 
lamp  per  year  for  all-night  and  every  night  service.  It  was 
also  stipulated  that  the  grantees  should  at  all  times,  after 
commencing  operations  under  their  franchise,  “  extend  their 
service  of  heat,  light  or  power,  or  either  of  them,  to  any  user  or 
users  within  the  city  limits  who  shall  make  application  there¬ 
for,  and  sign  the  usual  contracts  therefor,  whenever  and 
wherever  such  extensions,  based  upon  the  income  arising  from 
signed  contracts,  will  show  a  net  income  of  five  per  cent  per 
annum  on  the  necessary  additional  investment  One  of  the 
conditions  on  which  the  right  to  do  an  electric  lighting  busi¬ 
ness  was  extended  to  the  grantees,  was  that  they  should  not 
abandon  or  cease  to  do  a  heating  business,  as  contemplated  in 
their  original  franchise. 

120.  Division  of  net  profits  over  fixed  percentage;  issue 
of  bonds  limited— Wichita,  Ks. — Under  the  general  laws  of 
the  State  of  Kansas  governing  cities  of  the  first  class,  of 
which  Wichita  is  one,  every  electric  light  and  power  company 
is  required  to  pay  into  the  city  treasury  10  per  cent  of  its  net 
earnings  “  over  and  above  10  per  cent  earnings  on  its  invest¬ 
ment  ”.2  The  city  council  is  authorized  to  regulate  rates  to 
be  charged  for  light,  heat  and  power,  but  is  forbidden  to  fix 
a  rate  that  will  prevent  the  company  from  earning  at  least 
10  per  cent  on  its  capital  invested  in  the  city,  over  and  above 
its  reasonable  operating  expenses  and  the  expenses  for  main¬ 
tenance  and  taxes. 

By  a  franchise  granted  to  W.  B.  McKinley  and  associates, 
published  December  30,  1899,  the  City  of  Wichita  prescribed 
maximum  rates  for  arc  and  incandescent  lighting  and  limited 

1  Revised  Ordinances,  etc.,  op.  cit.,  p.  318. 

*  Section  170,  of  the  City  Charter  Act ;  See  Book  of  Ordinances  of  the  City  of 
Wichita,  1908,  p.  55. 


172 


MUNICIPAL  FRANCHISES. 


the  sale  of  mortgage  bonds  upon  the  electric  light  and  power 
plant  to  be  constructed  and  operated  by  the  grantees  to  “  the 
cost  of  construction  and  equipment  of  said  system  and  exten¬ 
sions,  and  the  cost  of  the  property  required  for  the  complete 
and  full  operation  of  said  system  of  electric  lights  and 
power  ”.1  The  grantees  were  also  prohibited  from  cutting 
or  trimming  trees,  except  under  the  direction  of  the  proper 
city  official. 

Under  a  franchise  granted  May  4,  1903,  to  the  Wichita 
Gas,  Electric  Light  and  Power  Company,  the  company  was 
required  to  furnish  light  free  to  the  city  library,  on  condition 
that  the  amount  consumed  should  not  exceed  $10  worth  per 
month  at  the  ordinary  rates  stipulated  in  the  franchise.2  For 
the  remainder  of  the  city  building  and  for  the  hose  houses,  the 
company  was  required  to  furnish  electric  light  at  the  rate  of 
five  cents  per  thousand  watts.  Electricity  to  operate  the 
elevator  in  the  city  building,  was  to  be  furnished  free  of 
cost. 

By  the  terms  of  another  franchise  granted  April  4,  1907, 
by  the  City  of  Wichita,  15  cents  per  thousand  watt  hours 
was  fixed  as  the  maximum  rate  for  residential  lighting  until 
July  1,  1909;  13|  cents  from  that  date  until  July  1,  1910; 
and  12|  cents  thereafter,  with  a  discount  in  all  cases  of  20 
per  cent  on  bills  paid  on  or  before  the  15th  day  of  the  month 
succeeding  that  in  which  the  service  was  rendered.3  The 
maximum  rate  of  “  commercial  ”  lighting  was  fixed  at  12 
cents  per  thousand  watt  hours,  with  a  similar  discount.  For 
power,  net  rates  were  established  ranging  from  eight  cents  per 
kilowatt  hour  for  the  first  100  kilowatts  used  per  month  to 
3J  cents  per  kilowatt  hour  for  all  over  500  kilowatts  used  per 
month.  Under  the  terms  of  this  franchise  the  grantee  agreed 
that  on  July  1,  1911,  the  city  council  should  have  its  choice 
of  receiving  one  per  cent  of  the  gross  earnings  under  the 
franchise  or  10  per  cent  of  the  net  earnings  over  and  above  10 
per  cent  earned  on  investment. 

121.  A  power  franchise  accepted  by  the  people— Grand 
Rapids,  Mich. —  In  the  early  electrical  franchises  granted  by 
the  City  of  Grand  Rapids,  were  found  many  of  the  usual 
provisions  relative  to  damages,  excavations  in  the  streets,  etc. 

1  Book  of  Ordinances  of  the  City  of  Wichita,  op.  cit.,  p.  631. 

a  Ibid.,  p.  637. 

8  Ibid.,  p.  644.  This  grant  was  to  J.  O.  Davidson. 


ELECTRIC  LIGHT  FRANCHISES.  173 

The  periods  covered  ranged  from  15  to  30  years.  One  of  the 
stock  provisions  in  all  these  franchises  was  the  following: 

“  The  City  of  Grand  Rapids  expressly  reserves  the  right  to  alter  and 
amend  the  ordinance  in  any  manner  necessary  for  the  safety  or  welfare 
of  the  public,  and  in  case  it  is  necessary  to  do  so,  to  protect  the  public 
interests.”  1 

Within  the  last  few  years  there  has  been  a  considerable 
development  of  water  power  in  Michigan  in  connection  with 
the  production  of  electrical  energy.  As  one  of  the  results  of 
this  development,  on  July  29,  1907,  the  city  granted  a  fran¬ 
chise  to  the  Grand  Rapids-Muskegon  Power  Company.2 
Under  the  city  charter  all  franchises  were  at  that  time  sub¬ 
ject  to  the  optional  referendum,  that  is  to  say,  if  12  per 
cent  of  the  electors  petitioned,  within  30  days  after  the 
passage  of  any  franchise,  to  have  it  submitted  to  popular  vote, 
it  had  to  have  the  approval  of  the  electors  before  going  into 
effect.  A  referendum  petition  was  filed  in  the  case  of  the 
Grand  Rapids-Muskegon  Power  Company’s  franchise,  but  the 
ordinance  was  approved  by  the  people.  This  ordinance  pro¬ 
vides  that  the  council  may  require  the  company  “to  make 
reasonable  extensions  of  its  power  and  light  wires  from  time 
to  time  ”.  It  forbids  the  company  to  locate  lines  in  the  public 
streets  for  conducting  electricity  at  a  pressure  exceeding  7,500 
volts;  but  wires  carrying  more  than  that  voltage  may  cross 
the  streets  where  necessary.  The  particular  streets  in  which 
the  company  proposed  to  place  its  fixtures,  were  designated  on 
a  map,  which  was  approved  and  made  a  part  of  the  franchise, 
with  the  condition  that  the  council  reserved  the  right  to 
change  the  approved  location  of  the  company’s  wires  in  any 
particular  instance  “  by  approving  an  equivalent  location 
reaching  the  same  destination”.  No  poles  were  to  be  erected 
less  than  45  feet  in  height  without  special  permission  of  the 
council.  The  location  of  extensions  proposed  by  the  company 
from  time  to  time,  was  to  be  subject  to  the  council’s  approval. 
The  company  was  authorized,  however,  to  acquire  the  existing 
lines  of  the  Grand  Rapids  Edison  Company,  which  was  at  the 
time  of  this  grant  the  sole  operating  company  in  the  city. 
One  interesting  provision  in  regard  to  the  new  company’s 

1  See  Compiled  Ordinances,  1907,  pp.  193,  196,  200,  203. 

*  Ordinance  No.  204,  printed  in  pamphlet  form  by  the  City. 


174 


MUNICIPAL  FRANCHISES. 


poles,  was  that  “  the  name  of  the  Power  Company  shall  be 
marked  thereon  in  plain  letters  not  less  than  one  inch  in 
height  ”.  Another  interesting  provision  was  to  the  effect  that 
“  whenever  by  reason  of  changes  in  the  grade  of  the  street, 
or  in  the  location  or  manner  of  constructing  any  water  pipes, 
gas  pipes,  sewers  or  other  public  utility,  it  shall  become  neces¬ 
sary  to  alter,  change,  adapt  or  conform  the  conduits  of  the 
Power  Company  thereto,  the  same  shall  be  done  entirely  at 
the  expense  of  the  Power  Company  and  without  any  claim 
for  reimbursement  or  damages  against  the  city  ”.  It  was 
stipulated  that  the  company  should  pay  an  annual  fee  of  $500 
to  the  city  and  should  “  furnish  pin  room  on  its  poles  for  the 
wires  of  the  street  lighting  circuits  of  the  city,  wherever  the 
pole  lines  of  the  Power  Company  and  the  city  occupy  the  same 
street,  alley  or  public  place  ”.  “  It  will  in  such  case,  when 

requested  by  the  city  ”,  says  the  ordinance,  “  transfer  such 
street  lighting  wires  to  and  string  them  on  its  own  poles,  the 
Power  Company  furnishing  the  labor  therefor.  It  will  there¬ 
after,  from  time  to  time,  as  the  city  may  request,  renew  and 
repair  such  lines,  the  city  furnishing  the  necessary  materials 
therefor  ”.  Provision  was  also  made  in  this  franchise  for  the 
use  of  the  company’s  poles  by  other  companies,  but  the  ex¬ 
clusive  use  of  “  the  top  10  feet  in  length  of  its  poles  for  its 
own  wires  and  for  those  of  the  city  ”,  was  reserved  to  the 
company.  In  case  the  company  could  not  agree  with  other 
companies  as  to  terms  for  the  joint  use  of  poles,  the  annual  . 
charge  was  to  be  fixed  by  the  Board  of  Public  Works. 

The  city  reserved  the  right  to  extend  at  any  time  the  limits 
of  the  district  within  which  underground  construction  was 
required.  Maximum  rates  were  fixed  in  the  ordinance,  as 
follows : 

For  light,  8  cents  per  kilowatt  hour,  with  a  minimum  charge  of  50 
cents  per  month,  the  company  “to  furnish  ordinary  carbon  filament 
lamp  renewals  free  to  its  customers  ”. 

For  power,  based  on  the  horsepower  load  connected,  8  cents  per 
horsepower  hour  for  25  horsepower  or  less;  2  cents  per  horsepower 
hour  for  more  than  25  and  not  more  than  75  horsepower;  If  cents  per 
horsepower  hour  for  more  than  75  and  not  more  than  150  horsepower; 
and  1|  cents  per  horsepower  hour  for  more  than  150  horsepower. 

Unless  bills  were  paid  by  the  15th  day  of  the  month  follow¬ 
ing  the  month  in  which  the  service  was  rendered,  the  company 
was  entitled  to  make  an  additional  charge  of  10  per  cent  as 


ELECTRIC  LIGHT  FRANCHISES. 


175 


a  penalty  for  non-payment.  It  was  stipulated  that  if  the  city, 
which  owned  a  public  lighting  plant  for  street  lighting, 
should  during  the  life  of  the  ordinance  enter  into  a  contract 
with  the  company  to  secure  electrical  power  “  to  operate  the 
generators  belonging  to  the  city,  and  used  for  furnishing 
street  lights  ”,  the  company  was  not  to  charge  for  this  service, 
for  current  delivered  at  the  city’s  switchboard,  more  than 
■J  cent  per  lamp  hour  for  lamps  of  the  same  candle  power  as 
those  then  in  use  (1200  candle  power).  The  ordinance  was 
granted  for  a  period  of  20  years.  Its  most  singular  feature, 
however,  was  that  it  was  to  go  into  effect  only  on  condition 
that  the  Grand  Rapids  Edison  Company  should  file  with  the 
city  clerk,  within  a  given  period,  “its  agreement  in  writing, 
accepting  and  agreeing  to  be  bound  by  the  same  regulations  as 
herein  imposed  on  said  Power  Company”. 

122.  Exclusive  for  certain  period  :  cutting  of  wires  : 
right  to  purchase— Cedar  Rapids,  Iowa. — A  franchise  granted 
by  the  City  of  Cedar  Rapids  December  5,  1890,  to  the  Cedar 
Rapids  Electric  Light  and  Power  Company  for  a  period  of 
25  years,  contained  a  provision  that  the  grant  should 
he  exclusive  for  three  years  and  that  during  this  time  the 
company  should  not  “  charge  unreasonable  or  exorbitant 
rates  for  light  or  power  furnished  by  it  to  any  of  its  patrons 
If,  in  the  opinion  of  the  city  council,  the  company  was  violat¬ 
ing  this  provision,  the  right  was  reserved  to  the  council  to 
appeal  to  arbitration  for  fixing  the  rates.  The  city  reserved 
“  the  right,  at  any  time  after  five  years,  to  purchase  the  entire 
plant,  property  rights  and  franchise  ”  of  the  company  at  a 
price  to  be  agreed  upon,  or  to  be  fixed  by  arbitration.  During 
the  first  three  years  of  the  franchise  the  company  was  re¬ 
quired  to  furnish  the  city  ten  32-candle  power  and  twenty 
16-candle  power  lights,  free  of  charge,  for  use  in  the  city 
hall  and  the  police  station.  The  city  reserved  the  right  at  any 
time  “  to  erect  its  own  plant,  machinery,  fixtures  and  ap¬ 
pliances  for  lighting  the  public  buildings,  streets,  alleys  and 
public  places  ”.  The  company  was  required,  so  far  as 
practicable,  to  place  its  poles  and  appliances  in  the  alleys,  and 
not  in  the  streets  or  parks  of  the  city  except  with  the  written 
approval  of  the  majority  of  the  council  committee  on  highways 
and  the  chief  engineer  of  the  fire  department.  Whenever  it 

1  Revised  Ordinances,  City  of  Cedar  Rapids,  1906,  p.  881. 


176 


MUNICIPAL  FRANCHISES. 


was  necessary  to  move  along  the  streets  a  vehicle  or  structure 
of  such  height  as  to  interfere  with  the  poles  or  wires,  the 
company  was  required  temporarily  to  remove  its  fixtures  for  a 
reasonable  period  of  time  not  exceeding  eight  hours,  to  allow 
passage.  But  such  removal  could  not  be  required  “  within 
two  hours  after  sunrise  or  two  hours  before  sunset,  nor 
between  sunset  and  sunrise,  nor  on  dark  and  cloudy  days  ”, 
when  the  company’s  patrons  “  would  be  seriously  incon¬ 
venienced  by  the  loss  of  light”.  The  officers  of  the  city  fire 
department  were  authorized,  in  their  discretion,  to  cut  and 
remove  the  company’s  wires  whenever  necessary  for  the  pro¬ 
tection  of  property  or  life  and  for  getting  control  of  any  fire ; 
and  it  was  made  the  duty  of  the  company  “  to  respond  to 
every  alarm  of  fire  with  one  of  its  skilled  workmen  with  proper 
appliances  for  cutting  electric  wire  when  the  chief  or  other 
engineers  in  charge  of  said  fire  shall  request  the  same,  and  also 
furnish  said  city  fire  department  one  pair  of  insulated  shears 
suitable  for  cutting  said  electric  wires  ”. 

123.  Fixtures  to  be  removed  before  expiration  of  fran¬ 
chise —Atlanta. — On  December  26,  1905,  the  city  of  Atlanta 
granted  a  franchise  to  the  Southern  Lighting  and  Power 
Company  to  use  the  streets  for  laying  pipes,  wires  and  ap¬ 
paratus  for  distributing  electricity  for  light,  heat  and  power.1 
Within  the  fire  limits  the  company’s  wires  were  to  be  placed 
underground  and  the  city  reserved  the  right  at  a  future  time 
to  require  the  wires  in  other  parts  of  the  city  put  underground. 
The  franchise  was  for  a  period  of  thirty  years  from  January 
1,  1906,  and  it  was  expressly  required  that  before  the  expira¬ 
tion  of  the  grant  the  company  should  remove  all  of  its  con¬ 
duits,  wires,  poles  and  other  apparatus  from  the  streets.  The 
company  was  forbidden  entrance  to  the  streets  to  make  such 
removal  after  January  1,  1936.  The  company  agreed  to  pay 
two  per  cent  of  its  gross  receipts  on  all  business  done  or 
originating  in  Fulton  County  during  the  first  twenty  years 
of  the  franchise  period  and  3  per  cent  during  the  remaining 
ten  years.  The  company  was  required  to  file  a  report  once  a 
year  setting  forth  its  gross  receipts,  and  the  city  was  author¬ 
ized  to  designate  a  committee  or  Board,  from  time  to  time, 
to  examine  the  company’s  books  for  the  purpose  of  ascertain¬ 
ing  what  the  gross  receipts  were.  The  percentage  payments 


1  See  National  Civic  Federation  Report,  1907,  Part  II,  Volume  I,  p.  463. 


ELECTRIC  LIGHT  FRANCHISES. 


177 


were  to  be  in  lieu  of  specific  registration  fees  and  business 
licenses  and  provision  was  made  for  deducting  the  state  tax 
on  the  value  of  the  franchise  from  the  amount  to  be  paid  by 
the  company  to  the  city.  The  company  agreed  to  hold  one 
duct  in  every  conduit  for  the  use  of  the  city  for  municipal 
purposes  free  of  charge.  Public  lights  of  2000  candle  power 
each  were  to  be  operated  by  the  company  at  an  annual  charge 
of  $65.  Incandescent  or  series  lights  of  75  candle  power  were 
to  be  maintained  at  a  charge  of  $28  per  year.  To  private 
consumers  the  company  was  to  furnish  current  for  light  and 
heat  at  not  more  than  10  cents  per  kilowatt  hour  and  for 
power  at  not  more  than  6  cents.  There  was  to  be  in  either 
case  a  discount  of  10  per  cent  on  bills  paid  by  the  10th  of  the 
following  month.  The  company  was  authorized  to  use  the 
pipes,  manholes  and  poles  of  the  Atlanta  Telephone  and 
Telegraph  Company  subject  to  the  approval  of  the  City 
Electrician  and  to  further  ordinances  that  might  be  passed 
by  the  city.  It  was  required  that  before  such  joint  use  was 
made  the  company  must  submit  detailed  plans  to  the  Board  of 
Electrical  Control  and  receive  its  approval.  The  ordinance 
was  to  be  accepted  within  sixty  days,  work  was  to  begin  within 
ninety  days  and  the  company’s  system  must  be  ready  for 
general  operation  within  twelve  months.  The  franchise  was 
to  be  forfeited  if  the  company  disposed  of  any  of  its  rights 
or  privileges  or  leased  its  property  without  the  consent  of  the 
city,  or  consolidated  with  any  other  company  or  individual, 
or  combined  to  raise  the  price  or  control  the  supply  of  electric 
current,  or  if  it  entered  into  any  agreement  looking  to  com¬ 
munity  of  interest. 

124.  Map  showing  sub-surface  structures ;  specifications 
for  poles  :  right  to  purchase  at  stated  periods— Columbus, 
Ohio. —  In  a  franchise  granted  March  28,  1887,  to  the 
Columbus  Edison  Electric  Light  Company,  it  was  required 
that  the  company  should  lay  its  pipes  containing  electric  wires 
in  a  line  parallel  with  the  curb  line  of  the  street  and  between 
the  curb  stone  and  the  line  of  the  lots  abutting  the  street 
“  when  the  city  civil  engineer  shall  determine  such  location 
to  be  practicable,  and  in  all  cases  within  three  feet  of  the  curb 
stone,  or  where  the  curb  stone  should  be,  and  to  a  depth  not 
exceeding  thirty  inches  ”x  It  was  also  stipulated  “  that  in  all 


1  Ordinance  No.  2394,  now  operated  by  Columbus  Railway  and  Light  Co. 


178 


MUNICIPAL  FRANCHISES. 


cases  where  work  requires  the  exercise  of  skill,  as  in  the  lay¬ 
ing  or  relaying  of  pavements  or  sidewalks,  said  corporation 
shall  employ  none  but  skilled  workmen,  familiar  with  the 
execution  of  such  work  It  was  made  optional  with  the  city 
authorities  themselves  to  restore  the  earth  and  relay  the  pave¬ 
ments  in  the  streets  when  taken  up  by  the  company,  and 
collect  the  expense  of  the  work  from  the  company. 

In  another  franchise,  granted  July  14,  1902,  to  the  East 
Columbus  Heating  and  Lighting  Company,  a  provision  was 
inserted  to  the  effect  that  the  company  “  shall  not  dig  and 
have  uncovered  at  the  same  time  trenches  of  a  length  ex¬ 
ceeding  1,000  feet  ”.1  Before  making  excavation  in  any  par¬ 
ticular  street,  the  company  was  required  to  submit  to  the 
Director  of  Public  Improvements,  for  his  approval,  “plats 
and  plans  *  *  *  of  the  full  width  of  the  public  way  on  the 
route  of  the  proposed  excavations,  upon  which  shall  be  in¬ 
dicated  all  present  known  or  ascertainable  surface  and  under¬ 
ground  construction,  and  the  location  desired  by  said  com¬ 
pany  ”.  The  company  was  required  during  construction  to 
employ  and  pay  an  inspector  selected  by  the  Board  of  Public 
Works  and  subject  to  the  orders  of  the  Director  of  Public 
Improvements.  The  company’s  conduits  were  to  be  laid  at 
a  depth  of  not  less  than  six  feet  below  the  established  grade 
of  the  street,  unless  by  special  consent  of  the  Board  of  Public 
Works,  and  the  company  was  required  to  pay  into  the  street 
repair  fund  the  sum  of  3  cents  “  per  lineal  foot  of  streetway 
in  which  its  mains  and  conduits  are  laid  The  company  was 
also  required  to  furnish  the  city,  free  of  charge,  sufficient  cur¬ 
rent  to  light  all  public  buildings,  including  schools  and 
libraries,  located  along  the  company’s  lines.  This  franchise 
included  many  detailed  provisions  in  regard  to  poles  and 
wires,  of  which  the  following  is  one : 

“All  poles  shall  be  live,  sound  cedar,  or  other  approved  wood,  free 
from  shakes  or  knots  which  would  impair  the  strength  of  the  same; 
shall  not  have  more  than  10  per  cent  of  rots  in  butts;  shall  be  peeled 
and  trimmed  of  knots  and  the  size  herein  before  referred  to;  shall  be 
measured  after  peeled ;  and  the  bend  in  any  direction  above  ground 
shall  not  exceed  one-half  of  the  diameter.” 

A  maximum  rate  of  15  cents  per  thousand  watts  was  es¬ 
tablished  for  lighting  for  the  first  twelve  and  one-half  years 

1  Ordinance  No.  19,850,  now  owned  by  the  Columbus  Public  Service  Co. 


ELECTRIC  LIGHT  FRANCHISES. 


179 


of  the  life  of  the  franchise,  with  discounts  ranging  from  10 
per  cent  to  40  per  cent,  according  to  the  size  of  the  bill,  on 
bills  paid  on  or  before  the  5th  day  of  the  month  succeeding 
the  month  in  which  the  current  was  used.  The  maximum 
rate  for  power  was  fixed  at  7  1-2  cents  per  thousand  watts, 
with  discounts  ranging  from  10  to  30  per  cent.  It  was  pro¬ 
vided  that  “  in  all  cases  the  rate  charged  patrons  of  said  com¬ 
pany,  under  like  circumstances,  shall  be  uniform  ”,  and  that 
the  rates  prescribed  should  be  a  subject  to  change  by  or¬ 
dinance  of  said  city  at  the  end  of  twelve  and  one-half  years 
from  the  date  of  passage  of  this  ordinance,  but  if  not  so 
changed  at  said  time,  shall  remain  as  herein  fixed  to  the  end  of 
franchise  period  The  company  was  authorized  to  shut  off 
electric  energy  from  any  consumer  only  in  case  the  con¬ 
sumer  had  been  in  default  for  ten  days  in  the  payment  of  his 
bill.  At  the  expiration  of  fifteen  years  and  at  the  end  of  each 
five-year  period  thereafter,  the  city  had  the  right  to  acquire  the 
assets  and  property  of  the  company  which  were  located  in 
the  city,  at  a  price  to  be  agreed  upon  or  to  be  fixed  by  ar¬ 
bitration.  It  was  provided  that  in  case  of  arbitration,  “  the 
price  fixed  upon  by  any  two  of  the  three  arbitrators  shall,  in 
the  absence  of  fraud,  be  final  and  binding”  upon  both  the 
city  and  the  company.  It  was  provided,  however,  that  any 
such  purchase  made  of  the  company’s  property  “  shall  be 
subject  to  all  then  existing  contracts  of  said  company  made 
in  the  usual  and  ordinary  course  of  its  business ;  but  nothing 
herein  contained  shall  prevent  said  city  from  acquiring  said 
property  by  the  exercise  of  the  right  of  eminent  domain”. 
The  company  was  required  to  keep  constantly  on  deposit 
with  the  city  treasurer  the  sum  of  $250,  out  of  which  might 
be  paid  the  actual  cost  of  any  work  done  by  the  city  where 
the  company  was  in  default.  This  franchise  was  granted  for 
a  period  of  twenty-five  years. 

125.  Municipal  franchises  not  required;  regulation  of 
rates  —  California. — Under  section  19  of  article  XI  of  the 
constitution  of  California,  in  any  city  where  there  is  no  public 
lighting  plant,  any  individual,  or  any  company  duly  incor¬ 
porated  under  and  by  authority  of  the  laws  of  the  state  for 
the  purpose  of  furnishing  artificial  light,  “  shall,  under  the 
direction  of  the  superintendent  of  streets,  or  other  officer  in 
control  thereof,  and  under  such  general  regulations  as  the 


180 


MUNICIPAL  FRANCHISES. 


municipality  may  prescribe  for  damages  and  indemnity  for 
damages,  have  the  privilege  of  using  the  public  streets  and 
thoroughfares  thereof,  and  of  laying  down  pipes  and  con¬ 
duits  therein,  and  connections  therewith  so  far  as  may  be 
necessary  for  introducing  into  and  supplying  such  city  and 
its  inhabitants  either  with  gas  light  or  other  illuminating 
light,  *  *  *  upon  the  condition  that  the  municipal  govern¬ 
ment  shall  have  the  right  to  regulate  the  charges  thereof  99 . 

The  general  laws  of  California  governing  “  corporations 
to  furnish  light  for  public  use  ”,  make  more  detailed  provis¬ 
ions  in  regard  to  electric  lighting  companies.  Section  629 
provides  as  follows: 

“  Upon  the  application  in  writing  of  the  owner  or  occupant  of  any 
building  or  premises  distant  not  more  than  one  hundred  feet  from  any 
main,  or  direct  or  primary  wire,  of  the  corporation,  and  payment  by 
the  applicant  of  all  money  due  from  him,  the  corporation  must  supply 
gas  or  electricity  as  required  for  such  building  or  premises,  and  caunot 
refuse  on  the  ground  of  any  indebtedness  of  any  former  owner  or  oc¬ 
cupant  thereof,  unless  the  applicant  has  undertaken  to  pay  the  same. 
If,  for  the  space  of  ten  days  after  such  application,  the  corporation 
refuses  or  neglects  to  supply  the  gas  or  electricity  required,  it  must 
pay  to  the  applicant  the  sum  of  fifty  dollars  as  liquidated  damages,  and 
five  dollars  per  day  as  liquidated  damages  for  every  day  such  refusal 
or  neglect  continues  thereafter.” 

This  regulation  seems  to  be  somewhat  modified  by  section 
630a,  which  is  as  follows : 

“No  corporation  is  required  to  construct  lines  for  the  supply  of  elec¬ 
tric  current  for  light  where  serious  obstacles  exist,  nor  shall  such  cor¬ 
poration  be  required  to  supply  such  current  from  a  direct  wire  at  a 
distance  too  remote  from  the  generating  station,  to  insure  a  sufficient 
supply;  nor  is  such  corporation  required  to  supply  electric  current  for 
light  from  a  primary  wire  carrying  current  of  high  voltage,  unless  the 
applicant  deposit,  in  advance,  a  sum  of  money  sufficient  to  pay  the 
actual  costs  of  such  construction  and  for  the  appliances  required  to 
supply  electric  current  with  safety  at  the  proper  voltage.” 

Section  632  provides  that  a  company  may  shut  off  the 
supply  of  electricity  from  any  person  who  neglects  or  refuses 
to  pay  for  the  electricity  supplied  or  the  rent  of  any  meter 
or  other  electrical  appliances  furnished  by  the  company  under 
contract. 

In  commenting  upon  the  regulation  of  rates  for  electrical 
service  by  the  city  council,  Municipal  Affairs,  the  official 
journal  of  the  Municipal  League  of  Los  Angeles,  in  its  issue 
for  April,  1908,  had  this  to  say: 


ELECTRIC  LIGHT  FRANCHISES. 


181 


“  Once  a  year  the  duty  devolves  upon  Council,  by  virtue  of  an  ordi¬ 
nance  passed  three  years  ago,  to  fix  the  rates  charged  by  gas,  electric 
light  and  telephone  companies.  To  the  end  that  an  intelligent  judg¬ 
ment  may  be  formed  as  to  a  just  rate  to  be  established,  the  companies 
are  required  to  submit  an  annual  statement  of  receipts  and  expenditures 
and  value  of  plant . 

“  The  entire  proceedings  in  this  matter  have,  up  to  date,  been  un¬ 
satisfactory  in  the  extreme.  The  figures  given  were  in  almost  every 
instance  incomplete  and  not  usable  for  the  purposes  which  the  law 
contemplates.  For  the  first  time,  this  year,  an  attempt  was  made  to 
get  an  intelligent  analysis  of  the  figures,  the  city  being  so  fortunate  as 
to  have  the  services  of  an  expert  accountant  in  Mr.  Mushet  of  the  audi¬ 
tor’s  office . 

“In  the  fixing  of  electric  current  rates,  the  auditor  made  a  strong 
presentation  in  favor  of  the  reduction  of  the  lighting  rate,  contending 
that  the  light  users  were  being  exploited  for  the  advantage  of  the 
power  users.  As  most  of  the  lighting  companies  had  refused  him  ac¬ 
cess  to  their  books,  and  as  their  figures  were  incomplete,  his  argument 
was  more  or  less  based  on  theory.  Possibly  if  Council  had  seen  fit  to 
order  a  reduction  of  a  cent  or  two  in  the  lighting  rate,  it  might  have 
resulted  in  the  opening  of  the  books  next  year.  As  it  is,  next  year’s 
experience  is  likely  to  be  a  repetition  of  this — putting  off  action  until 
the  last  minute,  then  a  great  waste  of  time  and  energy — and  nothing 
done.” 

126.  Additional  facilities  for  city  or  other  company ; 
compulsory  extensions  of  service  ;  release  of  old  franchises— 
Seattle. — A  Seattle  franchise  authorizing  the  construction 
and  maintenance  of  pole  lines  and  conduits  for  the  distribu¬ 
tion  of  current  “  for  electric  power,  heat  and  light  and  for 
any  other  purpose  for  which  electricity  may  be  used  ”,  was 
granted  to  William  T.  Baker,  “  his  representatives,  heirs  and 
assigns  ”,  on  August  2,  1898. 1  The  grantee  was  required  to 
make  all  poles  erected  and  conduits  laid  by  him,  except  lateral 
lines  extending  not  more  than  2,000  feet  from  the 
main  line  of  transmission,  of  sufficient  size  and  capacity  to 
afford  suitable  facilities  “  for  at  least  one  other  company 
requiring  as  great  facilities  as  the  grantee  ”.  The  grantee 
and  his  successors  were  not  permitted  to  use  their  additional 
facilities  for  a  period  of  ten  years,  and  if  during  that  time 
the  city  began  to  use  them  “  for  any  public  purpose  from 
which  it  shall  not  derive  a  revenue  ”,  it  would  have  the  right 
to  continue  such  use  free  of  charge  throughout  the  period  of 
the  grant.  The  city  was  also  authorized,  upon  paying  a  suit¬ 
able  compensation,  to  use  these  additional  facilities  during 
the  ten-year  period  for  the  purpose  of  furnishing  electricity 
“  for  other  than  public  purposes  ”,  and  might  authorize  any 

1  Charter  and  Ordinances  of  Seattle,  1908,  p.  462. 


182 


MUNICIPAL  FRANCHISES. 


other  company  having  a  substantially  similar  franchise  to 
use  these  facilities  on  the  same  condition.  In  either  case  the 
compensation  was  to  be  “  a  just  and  proportionate  share  of 
the  cost  of  construction  of  the  poles  and  conduits  ”,  and  of 
the  expense  of  altering  and  repairing  them,  together  with  6 
per  cent  interest  on  this  proportionate  sum  from  the  time 
the  investment  had  been  made  by  the  grantee.  In  any  case, 
if  the  city  or  any  other  company  commenced  the  use  of  the 
grantee’s  additional  facilities  within  the  ten-year  limit, 
such  use  might  be  continued  upon  the  same  terms  during 
the  whole  period  of  the  franchise.  If,  however,  these  addi¬ 
tional  facilities  remained  unused  at  the  end  of  the  ten-year 
period,  the  city  would  lose  its  right  to  use  them  or  to  grant 
the  use  of  them  to  another  company.  There  was  another 
provision,  however,  requiring  the  grantee  to  supply  “  suffi¬ 
cient  additional  capacity  to  accommodate  six  wires  of  the 
Seattle  Fire  Alarm  Telegraph  and  six  wures  of  the  Seattle 
Police  Signal  Call  system  ”,  which  was  always  to  be  “  held 
ready  and  available  for  use  by  the  city  ”,  free  of  charge.  It 
was  provided  that  the  grantee  should  throughout  the  life  of 
the  franchise,  “  supply  electricity  to  such  an  extent  as  the 
capacity  of  his  plant  and  his  facilities  for  increasing  the 
same  will  permit  to  all  persons  and  corporations  desiring  the 
same  anywhere  within  the  limits  of  the  City  of  Seattle  and 
situate  along  any  of  his  main  lines  of  transmission  or  within 
2,000  feet  thereof,  upon  their  complying  with  such  general 
rules  and  regulations,  not  inconsistent  herewith,  as  he  shall 
make  with  reference  thereto”.  It  was  also  provided  that 
after  July  1,  1904,  “whenever  there  shall  be  tendered  to  him 
bona  fide  applications  in  writing  for  lighting  or  domestic 
service  from  the  occupants  of  at  least  twenty-five  separate 
houses  or  residences  situate  within  an  area  of  forty  acres  of 
compact  and  contiguous  territory,  the  greatest  distance 
through  or  across  which  shall  not  exceed  one-half  mile,  who 
shall  each  offer  to  enter  into  a  written  contract  to  use  electric 
current  for  lighting  or  domestic  purposes  at  their  several 
residences  for  a  period  of  not  less  than  one  year  ”,  the  grantee 
must  within  ninety  days  furnish  the  service  asked  for  at  a 
rate  not  in  excess  of  12  cents  per  kilowatt  hour.  In  regard  to 
power  service  it  was  provided  that  the  grantee,  whenever  he 
had  received  “written  applications  for  power  aggregating 


/ 


ELECTRIC  LIGHT  FRANCHISES.  183 

200  horsepower,  to  be  used  and  paid  for  during  not  less  than 
eight  hours  of  each  secular  day,  and  to  be  furnished  to  not 
more  than  eight  customers  or  consumers,  and  all  of  whom 
shall  be  situate  within  a  radius  of  half  a  mile,  from  a  point 
in  any  part  of  the  city  where  he  has  not  constructed  a  line  of 
transmission,  and  the  applicants  shall  have  each  tendered 
such  grantee  a  written  contract  for  such  use  of  power  for  at 
least  two  years  ”,  with  proper  sureties,  the  grantee  must 
within  six  months  furnish  the  current  required  at  a  rate  not 
in  excess  of  6  cents  per  kilowatt  hour.  This  franchise  was 
granted  for  the  period  of  thirty-six  years.  It  was  stipulated 
that  “  this  grant  shall  not  be  transferable  or  assignable  with¬ 
out  the  consent  of  the  city  council,  and  said  grantee  shall  not 
consolidate  nor  merge  with  any  company  or  corporation  or 
enter  into  any  agreement  to  prevent  competition  or  to  prevent 
the  reduction  of  the  price  of  electricity  without  such  consent; 
provided,  however,  that  said  grantee  or  assignee  may  include 
this  grant  in  any  mortgages  which  he  or  it  may  give  to  secure 
his  or  its  corporate  bonds  ”. 

On  March  14,  1902,  the  City  of  Seattle  granted  a  fran¬ 
chise  for  an  underground  and  overhead  electrical  system  to 
S.  L.  Shuffleton,  with  the  provision  that  ce  this  franchise  and 
the  rights  herein  granted  may  be  assigned  or  mortgaged ;  but 
no  such  assignment  or  mortgage  shall  be  valid  until  a  copy 
thereof  has  been  filed  in  the  office  of  the  city  comptroller  ”.x 
This  franchise  was  granted  for  a  period  of  50  years  “  and  no 
longer,  and  shall  absolutely  cease  and  terminate  at  the  end 
of  said  term  of  50  years  ”.  It  was  specifically  set  forth  that 
the  franchise  was  “  intended  to  apply  to  all  streets,  alleys  and 
public  places  of  said  city,  now  or  hereafter  existing  ”,  but  that 
it  was  not  to  be  an  exclusive  privilege  for  the  use  of  any  street 
or  other  public  place.  It  was  provided  that  if  the  grantee  or 
his  successors  should  at  any  time  acquire  the  ownership  of  any 
electric  light  franchise  theretofore  granted  by  the  city,  or  if 
this  franchise  should  be  assigned  to  any  company  owning  or 
operating  under  any  former  franchise,  or  franchises,  then,  in 
any  such  case,  the  owner  of  this  franchise  should,  within  a 
certain  fixed  period,  file  with  the  city  comptroller  a  suitable 
instrument  (( releasing  such  prior  franchise  or  franchises  so 
acquired,  or  owned,  or  operated,  other  than  street  railway 


1  Charter  and  Ordinances,  op.  cit p.  519. 


184 


MUNICIPAL  FRANCHISES. 


franchises  The  “  intention ”  of  this  provision  was  ex¬ 
plained  as  being  that  after  the  expiration  of  the  time  fixed, 
“  no  person,  company  or  corporation  owning  or  operat¬ 
ing  under  this  franchise  shall  own  or  operate  any  of  such 
former  franchises,  other  than  street  railway  franchises,  but 
shall  on  acquiring  any  thereof  release  the  same  as  above 
provided 

127.  Monopoly  through  consolidation ;  liberal  franchise 
by  vote  of  taxpayers— Denver — On  March  24,  1883,  a  fran¬ 
chise  was  granted  by  the  City  of  Denver  to  the  Colorado 
Edison  Electric  Light  Company  for  an  underground  system 
for  the  transmission  of  electricity  on  condition  that  the  right 
of  way  so  granted  should  be  used  subject  to  general  ordinances 
and  regulations  passed  by  the  city  relative  to  the  use  and  care 
of  the  streets,  and  also  on  condition  that  the  company  should 
execute  a  $25,000  bond  for  the  payment  of  any  costs  and  ex¬ 
penses  sustained  by  the  city  by  reason  of  the  grant.1 

On  August  13,  1887,  a  franchise  was  granted  to  the  Denver 
Light,  Heat  and  Power  Company  both  for  pole  lines  and  for 
conduits.2  Under  this  grant  the  company  was  required,  upon 
petition  of  citizens,  “  to  extend  its  lines  for  the  purpose  of  fur¬ 
nishing  light  and  heat  to  consumers  along  any  street,  to  any 
part  of  the  City  of  Denver,  in  all  cases  where,  along  the  lines 
of  such  extension,  an  average  of  six  consumers  of  such  light 
or  heat,  per  block,  are  secured  to  said  company,  and  the  city 
council  may,  in  its  discretion,  order  such  extension  upon  such 
petition  ”,  on  condition,  however,  that  the  work  be  not  re¬ 
quired  unless  the  capacity  of  the  company’s  plant  “  is  suffi¬ 
cient  to  supply  such  consumers  on  such  extension  ”.  The 
company  was  required  to  pay  down  for  this  franchise  the  sum 
of  $5,000. 

The  Colorado  Edison  Electric  Light  Company  and  the 
Denver  Light,  Heat  and  Power  Company  were  soon  after¬ 
ward  merged  to  form  the  Denver  Consolidated  Electric  Com¬ 
pany,  and  the  franchises  of  both  constituent  companies  were 
confirmed  by  the  common  council.3  The  consolidated  com¬ 
pany  had  a  monopoly  of  the  electric  light  and  power  business 
of  Denver  for  many  years.  On  March  30,  1900,  however,  a 

1  “  Franchises  and  Special  Privileges  ”  as  granted  by  the  City  and  County  of 

Denver,  1907,  p.  4. 

1  Ibid.,  p.  105. 

8  Ibid.,  p.  7,  Ordinance  No.  63,  approved  July  8,  1889. 


ELECTRIC  LIGHT  FRANCHISES. 


185 


new  franchise  was  granted  to  Charles  F.  Lacombe  for  the 
construction  and  operation  of  “  a  street  arc  electric  light  and 
power  plant,  and  also  a  commercial  electric  light  and  power 
plant,  for  the  purpose  of  producing  and  transmitting  an 
electric  current  for  light,  heat  and  power  purposes  for  use  by 
the  said  City  of  Denver  and  the  residents  and  citizens  thereof, 
and  to  erect,  maintain  and  remove  poles  and  to  string  wires 
thereon  ”  in  the  streets  and  alleys  enumerated  at  great  length. 
A  new  franchise  was  substituted  for  this  one  on  February 
14,  1901. 1  The  grantee  was  required  to  erect  a  “  city  arc 
lighting  plant  at  some  suitable  location  for  trackage  and 
water  supply,  either  on  purchased  land  or  on  land  leased  from 
the  city  ”,  substantially  in  accordance  with  a  detailed 
description  contained  in  the  franchise  and  having  a  total 
capacity  to  furnish  1,250  arc  lamps  of  2,000  candle  power 
each.  It  was  stipulated  that  Lacombe  should  expend,  in  the 
erection  of  this  plant,  $225,000,  exclusive  of  expenditures  for 
land,  and  he  was  to  provide  “  trackage  facilities,  water  supply 
and  relay  machinery,  to  insure  absolute  continuity  of  serv¬ 
ice  ”.  The  grantee  was  also  required  to  construct  a  commer¬ 
cial  plant  within  four  months  of  the  approval  of  the  franchise, 
to  compete  with  the  existing  monopoly. 

By  the  terms  of  the  franchise  the  city  entered  into  a  con¬ 
tract  with  the  grantee  to  take  from  him,  for  a  period  of  10 
years,  public  lighting  service  and  to  pay  therefor  at  the  rate 
of  $7.50  a  month  for  each  2,000  candle  power  light  operated 
on  an  all-night  schedule.  A  maximum  rate  for  commercial 
lighting  on  the  meter  basis  was  fixed  at  10  cents  per  kilowatt 
hour  and  for  power  a  maximum  rate  of  4  cents  was  fixed. 
The  grantee  was  required  to  pay  the  city  3  per  cent  of  his 
gross  receipts  from  light,  heat  and  power  sold  to  private  con¬ 
sumers.  It  was  also  provided  that  the  city  should  have  the 
right  to  purchase  the  cc  city  arc  lighting  plant  ”,  at  the  end  of 
any  year  after  its  completion,  at  a  price  ranging  from 
$230,000  at  the  end  of  the  first  year  to  $40,000  at  the  end  of 
the  tenth  year.  It  was  stipulated  that  the  grantee,  during 
the  ten-year  term,  should  “  keep  the  said  arc  lighting  plant 
in  as  good  order  and  condition  as  the  same  was  when  erected 
and  constructed,  ordinary  wear  and  tear  excepted  ”.  It  was 
also  provided  that  the  city  might  buy  the  commercial  lighting 

1  “  Franchises  and  Special  Privileges,”  op.  cit.,  p.  144. 


186 


MUNICIPAL  FRANCHISES. 


plant  at  the  end  of  10,  15  or  19  years  from  the  date  of  the 
franchise,  at  its  fair  cash  value,  to  be  determined  by  arbitra¬ 
tion.  The  grantee  was  prohibited  from  selling  or  conveying 
his  electric  light  and  power  plants  or  either  of  them  author¬ 
ized  by  the  ordinance  to  “  any  person,  firm  or  corporation 
now  engaged  in  the  business  of  providing  or  vending  elec¬ 
tricity  for  light,  heat  and  power  purposes  in  the  City  of 
Denver  ”,  or  combining  with  any  such  concern.  The  fran¬ 
chise  was  granted  for  a  period  of  20  years. 

The  Denver  Consolidated  Electric  Company  had  already 
merged  with  the  company  furnishing  gas,  to  form  the  Denver 
Gas  and  Electric  Company,  having  a  complete  monopoly  of 
lighting  interests  in  Denver.  As  soon  as  the  Lacombe  Electric 
Company,  operating  under  the  franchise  just  described,  had 
commenced  to  furnish  light,  a  <e  war  of  rates  ”  ensued.1  The 
old  company  reduced  rates  to  2J  cents  per  kilowatt  hour, 
and  finally  forced  the  Lacombe  Company  to  sell  out.  In  the 
course  of  the  rate  war,  in  order  to  kill  its  competitor,  the  old 
monopoly  had  entered  into  many  contracts  with  consumers 
to  furnish  electricity  at  ridiculously  low  rates.  It  also  re¬ 
ceived  many  low-rate  contracts  from  its  defeated  rival  when 
the  latter’s  property  was  taken  over.  In  order  to  get  rid  of 
these  unprofitable  contracts,  which  had  served  their  purpose 
in  destroying  competition,  the  company  went  into  a  receiver’s 
hands,  got  its  rates  raised  again  to  a  profitable  basis,  and  was 
reorganized. 

On  May  15, 1906,  this  company  secured  a  new  20-year  fran¬ 
chise  from  the  taxpaying  electors  of  the  City  of  Denver.2 
Under  the  terms  of  this  franchise  the  company  agreed  that 
all  its  poles  should  be  kept  in  good  condition  and  painted 
“  in  a  manner  approved  by  the  Art  Commission  of  the  City  ”. 
The  company  was  required  to  extend  its  lines  to  a  distance 
of  100  feet  to  supply  any  consumer  demanding  electricity 
who  would  agree  to  use  it  for  at  least  a  year.  Maximum  rates 
for  incandescent  lighting  on  a  meter  basis  were  fixed  at  10 
cents  per  kilowatt  hour,  with  a  discount  of  10  per  cent  on 
bills  paid  within  10  days,  provided  that  the  company  should 
receive  a  minimum  of  5  cents  per  month  for  each  lamp  in¬ 
stalled,  and  in  no  case  less  than  one  dollar  per  month  from 

1  See  J.  Warner  Mills,  “  The  Economic  Struggle  in  Colorado,”  published  in  The 
Arena  for  November,  1905,  p.  489. 

2  “  Franchises  and  Special  Privileges,”  op.  cit p.  57. 


ELECTRIC  LIGHT  FRANCHISES. 


187 


each  consumer.  For  incandescent  lighting  on  the  “  readiness- 
to-serve  ”  basis  on  yearly  contracts,  the  maximum  rate  was 
fixed  at  $9  per  year  per  consumer,  plus  $1.80  per  year  for 
each  16-candle  power  lamp  demanded,  plus  5  cents  per 
kilowatt  hour  for  current  used,  with  a  discount  of  10  per  cent 
on  the  entire  amount  for  prompt  payment.  Rates  for  arc 
lighting  were  to  be  made  “  corresponding  to  those  for  in¬ 
candescent  lamps,  taking  into  consideration  the  relative 
candle  power 99 ,  For  power  purposes  the  meter  rate  was  not 
to  exceed  4  cents  per  kilowatt  hour,  with  a  10  per  cent  dis¬ 
count,  provided  that  the  company  should  receive  a  minimum 
of  one  dollar  per  month  for  each  horsepower  connected,  and  in 
no  case  less  than  $3  per  month  from  each  consumer.  The 
“  readiness-to-serve  99  rate  for  power  was  fixed  at  a  maximum 
of  $9  per  year  for  each  consumer,  plus  $24  for  each  horse¬ 
power  demanded,  plus  3  cents  per  kilowatt  hour  for  current 
used,  with  10  per  cent  discount  as  in  the  preceding  cases.  The 
company  agreed  to  pay  into  the  city  treasmy,  until  the  end 
of  the  year  1907,  all  of  its  gross  receipts  from  the  sale  of 
electricity  for  lighting  purposes  in  excess  of  an  average  of 
7  1-2  cents  per  kilowatt  hour;  during  1908  and  1909,  all  in 
excess  of  an  average  of  7  1-10  cents  per  kilowatt  hour; 
during  1910  and  1911,  all  in  excess  of  an  average  of  6  7-10 
cents  per  kilowatt  hour;  during  1912  and  1913,  all  in  excess 
of  6  3-10  cents  per  kilowatt  hour;  during  1914  and  there¬ 
after,  all  in  excess  of  6  cents  per  kilowatt  hour. 

The  company  acquired  the  right  to  purchase  the  property, 
contracts  and  franchise  of  the  Lacombe  Electric  Company, 
released  from  all  the  city’s  contracts,  options  and  rights  to 
purchase,  contained  in  the  Lacombe  franchise.  The  company 
agreed  to  enter  into  a  new  contract  with  the  city  to  furnish 
arc  lights  at  the  rate  of  $60  per  lamp  per  year  and  to  extend 
its  old  contract  on  the  new  basis  for  a  period  of  10  years.  The 
company  also  agreed  to  remove  all  duplicate  pole  lines  within 
the  limits  of  the  city.  It  was  specifically  provided  that  the 
proposal  or  granting  of  this  franchise  should  not  constitute  a 
waiver  of  any  of  the  rights  or  privileges  claimed  by  the 
Denver  Gas  and  Electric  Company  or  its  assignor  or  prede¬ 
cessor  companies,  but  that  all  such  rights  and  privileges 
should  remain  wholly  unaffected  by  this  franchise.  As  com¬ 
pensation  for  the  franchise,  which  also  included  the  right  to 


188 


MUNICIPAL  FRANCHISES. 


furnish  gas  for  the  same  period  of  20  years,  the  company 
agreed  to  pay  the  city  $1,000,000  in  80  equal  instalments  of 
$12,500  each,  payable  quarterly  throughout  the  life  of  the 
franchise.  The  company  also  agreed  to  execute  a  bond  in 
the  sum  of  $50,000,  conditioned  upon  the  full  and  faithful 
performance  of  all  the  terms  and  conditions  of  the  grant  and 
to  protect  the  city  from  damages  arising  out  of  the  exercise 
of  the  franchise. 

128.  A  good  franchise  vetoed  because  it  was  not  perfect— 
Minneapolis. — The  City  of  Minneapolis  has  for  the  past  three 
years  been  discussing  the  question  of  granting  a  new  fran¬ 
chise  to  the  Minneapolis  General  Electric  Company,  which 
now  has  a  monopoly  of  the  electric  light,  heat  and  power 
business  in  that  city.  A  new  ordinance  was  passed  June  12, 
1908,  only  to  be  vetoed  by  the  Mayor.1  This  ordinance, 
having  been  drafted  as  the  result  of  long  investigation  and 
study,  contained  many  interesting  features.  It  provided  that 
the  company  should  have  the  right,  and  should  assume  the 
obligation,  to  maintain  and  operate  a  plant  for  generating 
and  furnishing  electrical  energy  for  public  and  private  use, 
and  for  the  period  of  30  years  should  have  the  right  “  to  use, 
to  the  extent  necessary  therefor,  the  streets,  alleys  and  public 
places  of  said  city,  including  any  territory  that  may  here¬ 
after  be  added  thereto  ",  for  maintaining  conduits  and  pole 
lines  for  electrical  purposes.  The  right  granted  to  the  com¬ 
pany  was  to  be  subject  to  all  reasonable  regulations,  by  state 
laws  or  city  ordinances,  “  relative  to  the  rates  to  be  charged 
by  said  grantee,  to  the  use  of  the  streets,  alleys  and  public 
places  of  said  city,  to  the  making  of  openings,  excavations 
and  constructions  therein,  to  the  stringing  of  wires,  cables 
and  conductors  thereon,  to  the  laying  of  subways,  conduits 
and  ducts  therein,  to  the  placing  of  wires,  cables  and  con¬ 
ductors  underground,  to  the  construction,  maintenance  and 
operation  of  electrical  plants  or  systems  therein,  or  in  any 
way  pertaining  to  the  business  of  generating  and  distributing 
electrical  energy  in  said  city,  which  regulations,  whether 
heretofore  or  hereafter  made,  said  grantee,  by  acceptance  of 
this  ordinance,  agrees  shall  be  complied  with  by  it  without 


1  The  ordinance  was  adopted  and  recommended  to  the  City  Council  for  passage, 
April  1, 1908.  by  a  Special  Committee  appointed  Nov.  8,  1907.  The  Mayor’s  veto 
message  was  published  in  the  Minneapolis  Daily  News,  June  20,  1908. 


ELECTRIC  LIGHT  FRANCHISES. 


189 


unnecessary  delay;  and  all  reasonable  regulations  so  im¬ 
posed  by  any  such  ordinance  shall  be  binding  upon  said 
grantee,  whether  authorized  by  the  laws  of  said  state  or  not, 
unless  expressly  prohibited  by  said  laws  ”.  It  was  stipulated 
that  the  company’s  franchise  should  be  subject  to  the  first 
and  superior  right  of  the  city  to  use  and  occupy  the  streets 
“for  all  public  purposes  and  for  the  installation,  extension 
and  maintenance  of  any  sewer,  water  or  other  system  or 
public  utility,  now  or  hereafter  owned  or  operated  by  said 
city,  and  all  appurtenances  thereto  ”,  and  that  the  company 
should,  at  its  own  expense,  remove  or  change  the  location  of 
any  of  its  fixtures  “  whenever  the  public  interest,  necessity 
or  safety  requires  such  action  The  company  agreed  to  file, 
within  six  months  of  the  acceptance  of  the  ordinance,  a  plat 
of  its  existing1  plant,  showing  all  its  conduits,  subways,  over¬ 
head  and  underground  wires,  poles  and  other  fixtures,  and, 
before  making  any  extensions,  to  file  a  similar  plat  of  the 
proposed  extension  and  obtain  from  the  city  council  a 
permit  definitely  designating  the  space  to  be  occupied  by 
the  company’s  new  work,  “  provided  that  available  space 
exists  ”,  and  it  was  expressly  stipulated  that  “  no  other  or  dif¬ 
ferent  space  shall  be  used  or  occupied  by  said  grantee;  nor 
shall  such  space  be  used  for  any  purpose  or  in  any  manner 
other  than  that  designated  The  company  agreed  to  com¬ 
plete  any  authorized  work  of  repair,  construction  or  exten¬ 
sion  commenced  by  it,  without  unnecessary  delay  and  to 
replace  the  street  in  as  good  condition  as  formerly;  but  the 
city  reserved  the  right,  either  by  ordinance  or  by  resolution 
at  the  time  of  issuing  a  permit,  itself  to  make  the  repair  or 
replacement  at  the  company’s  expense. 

The  company  agreed  to  provide  space  on  its  poles  and  in 
its  conduits  for  the  city’s  fire  alarm  and  police  wires  and, 
at  its  own  expense,  to  string  such  wires  on  its  poles  and  draw 
them  into  its  conduits  when  required  to  do  so  by  the  city. 
The  company  also  agreed  to  provide  space  on  its  poles  and  in 
its  conduits,  at  reasonable  rates,  for  fixtures  for  street  light¬ 
ing  and  power  and  other  municipal  purposes. 

The  city  reserved  the  right,  through  an  official  whose  duties 
might  be  prescribed  by  the  city  council,  to  inspect  all  parts  of 
the  company’s  plant,  “  including  meters  and  apparatus  which 
it  shall  furnish  to  its  customers,  and  to  take  all  proper  ways 


190 


MUNICIPAL  FRANCHISES. 


and  means  to  test  the  same  and  to  ascertain  the  accuracy 
and  efficiency  thereof 

The  company  assumed  the  obligation  of  extending  its  lines 
so  as  to  furnish  electrical  energy  to  applicants  therefor  at  the 
regular  rates,  but  during  the  first  five  years  of  the  grant  no 
extension  was  to  be  ordered  “  unless  the  amount  of  the  bills 
for  electrical  energy  for  which  such  extension  is  ordered, 
shall  amount  for  the  first  year  to  at  least  40  per  cent  of  the 
cost  to  the  grantee  of  such  extension  After  the  expiration 
of  five  years,  if  the  construction  of  any  extension  ordered  by 
the  council  should  occasion  such  an  expense  as  to  make  the 
rates  for  electrical  energy  then  in  force  unjust  or  unreason¬ 
able,  the  company  was  authorized  to  apply  to  the  council  to 
have  such  rates  refixed;  and,  in  the  event  of  the  council’s 
refusal  to  do  so,  the  company  was  authorized  to  appeal  to  the 
courts  for  a  readjustment  of  rates. 

It  was  provided  that  the  company  should  “#at  all  times  use 
and  exert  every  reasonable  effort  to  maintain  its  plant  at  the 
highest  practical  efficiency;  to  adopt,  as  soon  as  it  may  be 
practicable,  all  available  improvements  arising  in  the  course 
of  the  development  of  the  business  of  generating  and  furnish¬ 
ing  electrical  energy;  to  continuously  furnish  an  ample 
supply  of  electrical  energy  to  all  of  its  customers  and  all  ap¬ 
plicants  for  the  same  along  its  entire  system  and  all  exten¬ 
sions  thereof,  and  to  give  good  service 

The  company  was  bound  to  establish,  within  a  reasonable 
time  after  the  prescribed  rates  should  go  into  effect,  and  “  at 
all  times  thereafter  keep  proper  and  accurate  books  of  ac¬ 
count  and  records,  which  shall  at  all  times  show  correctly 
and  in  detail  all  the  financial  transactions,  earnings  and 
receipts  of  the  grantee’s  plant  to  which  this  ordinance  ap¬ 
plies,  as  hereinafter  defined,  the  quantity  and  classification 
of  all  electrical  energy  furnished  to  the  several  customers 
thereof,  the  time  or  times  when  such  electrical  energy  was 
so  furnished,  the  demand  made  upon  said  grantee’s  station 
or  stations  every  30  minutes  and  the  class  or  classes  of  cus¬ 
tomers  making  up  such  station  demands  so  far  as  practicable, 
the  charges  for  such  electrical  energy,  all  expenses  of  every 
nature  connected  therewith,  and  the  cost  of  all  extensions 
and  additions  to  and  alterations  of  the  grantee’s  said  plant 
In  addition  to  other  books,  records  and  accounts  pertaining 


ELECTRIC  LIGHT  FRANCHISES. 


191 


to  the  business  of  the  company,  as  might  be  required  by  the 
council,  “  it  was  especially  stipulated  that  the  grantee  should 
keep  “  a  correct  record  of  the  number  of  kilowatt  hours  of 
use  of  electrical  energy  and  the  hours  of  the  day  when  so  used 
and  the  sum  charged  to  each  of  its  customers  for  the  same, 
under  the  schedule  of  the  several  different  rates,  according  to 
this  ordinance  and  such  other  schedule  or  schedules  of  rates 
as  may  be  in  force  and  effect  from  time  to  time  during  the 
life  of  this  ordinance,  and  also  according  to  present  existing 
contracts,  including  the  percentage  of  output  of  electrical 
energy  under  each  of  said  schedules  and  contracts  corre¬ 
sponding  to  the  different  hours’  use  of  the  customer’s  demand 
so  far  as  practicable  This  data  was  to  be  tabulated  and 
made  the  basis  of  a  report  to  the  city  council  whenever  called 
for.  All  books  of  account  and  records  of  the  company  were 
to  be  open  at  all  reasonable  times  to  the  inspection  of  the  city 
comptroller  or  his  authorized  deputy,  or  to  the  inspection  of 
any  public  accountant,  expert  or  engineer  appointed  by  the 
council.  Any  such  representative  of  the  city  was  authorized 
to  obtain  from  the  company’s  books  any  information  which 
the  council  might  by  resolution  require,  and  the  company 
agreed  to  keep  all  its  books  and  records  at  its  office  in  the 
City  of  Minneapolis.  The  company  also  agreed  to  furnish 
any  other  information  regarding  its  property  and  business 
which  might  be  material  to  a  proper  determination  of  the 
question  of  rates  or  service.  Information  furnished  the 
council  under  these  provisions  was  to  be  in  writing  and  cer¬ 
tified  to  under  oath  by  the  company’s  officers. 

It  was  provided  that  the  rates  charged  by  the  company 
should  be  just  and  reasonable  and  “  without  unjust  discrim¬ 
ination  either  between  different  classes  of  its  customers  or 
between  different  customers  of  the  same  class;  that  all  such 
rates  shall  at  all  times  be  public  and  the  tariff  or  schedule  of 
rates  to  the  different  classes  of  customers  shall  at  all  times 
be  kept  by  the  grantee  on  file  in  the  offices  of  the  city 
comptroller  and  city  clerk  ”.  It  was  also  provided  that 
all  service  except  that  furnished  to  the  city,  should  be 
metered,  except  as  designated  by  the  common  council, 
and  that  the  company  should  “  neither  charge  nor  receive 
any  amount  or  rate  for  electrical  energy  furnished  by  it  other 
than  the  rates  provided  for  in  this  ordinance,  without  the 


192 


MUNICIPAL  FRANCHISES. 


consent  of  the  city  council,  nor  shall  it  pay  or  allow  any  re¬ 
bate,  refund  or  deduction,  directly  or  indirectly,  or  in  any 
manner  or  form  whatsoever  from  the  rates  chargeable  as 
provided  in  this  ordinance  for  such  electrical  energy,  with¬ 
out  the  consent  of  the  city  council  It  was  further  stipulated 
that  all  existing  contracts  between  the  company  and  any  of 
its  customers  providing  for  the  payment  of  any  unjustly 
discriminatory  rate  within  the  provisions  of  the  ordinance, 
should,  when  so  declared  by  the  city  council,  “  be  voided  by 
said  grantee  if  it  legally  may  ”. 

A  rate  for  public  uses  was  established  for  the  period  of  one 
year,  to  remain  effective  thereafter  until  redetermined  by 
the  common  council  or  by  arbitration.  Under  this  rate  the 
city  was  to  get  electrical  energy  for  not  to  exceed  $33  an¬ 
nually  per  horsepower  for  4,000  hours’  use  “  for  2,000  horse¬ 
powers  of  electrical  energy,  or  as  much  more  thereof  as  said 
city  may  desire,  delivered  to  said  city  for  municipal  light¬ 
ing,  heating,  power  or  other  municipal  purposes,  at  a 
switchboard  or  station  to  be  provided  and  operated  by 
said  city  and  located  within  one  mile  from  the  city  hall 
The  company  was  not  to  be  required,  however,  to  furnish 
the  city  with  electrical  energy  so  long  as  it  supplied  the 
city  with  street  lighting.  The  maximum  rate  for  street 
lighting,  to  be  effective  for  one  year  or  until  redetermined  by 
the  council  or  by  arbitration,  was  established  at  $65  per  lamp 
per  annum,  operated  on  an  all-night  and  every-night  schedule 
for  3,650  hours  per  year.  The  council  reserved  the  right  to 
order  reasonable  changes,  from  time  to  time  after  the  first 
year,  in  the  company’s  existing  street  lighting  system  or 
methods,  “  having  regard  in  exercising  such  right  to  the  term 
for  which  municipal  lighting  contracts  are  made,  the  cost 
to  the  grantee  required  to  make  the  changes  ordered,  the 
loss  to  the  grantee  on  account  of  depreciation  in  value  of 
equipment  because  of  such  changes,  and  the  then  efficiency  of 
the  grantee’s  system  or  methods  of  street  lighting,  together 
with  all  other  facts  which  properly  may  be  considered  in 
determining  the  reasonableness  of  the  exercise  of  such  right 
If  rates  for  street  lighting  fixed  by  the  council  at  any  time 
proved  unacceptable  to  the  company,  the  question  was  to  be 
settled  by  arbitration ;  but  any  such  rate,  when  fixed  by  the 
council,  was  to  go  into  immediate  effect  and  remain  in  force 


ELECTRIC  LIGHT  FRANCHISES. 


193 


until  redetermined  by  the  council  or  by  arbitrators.  How¬ 
ever,  if  the  rate  fixed  by  the  arbitrators  proved  to  be  in  ex¬ 
cess  of  the  one  fixed  by  the  council,  the  city  was  required  to 
make  up  the  difference  to  the  company;  and  if  the  arbitra¬ 
tors’  rate  was  less  than  the  one  fixed  by  the  council,  the  com¬ 
pany  would  have  to  refund  the  difference. 

For  private  lighting  maximum  rates  were  also  fixed,  to  be 
in  effect  for  the  first  year  and  thereafter  until  redetermined 
by  the  council  or  the  courts.  The  company  was  required  to 
“  furnish  and  install  all  service  wires  and  apparatus,  in¬ 
cluding  meters,  which  may  be  necessary  to  supply  electrical 
energy  to  the  customers’  premises  ” ;  but  was  not  required,  or 
even  authorized  without  the  special  permission  of  the  coun¬ 
cil,  “  to  furnish  gratuitously  any  lamps,  motors  or  other  ap¬ 
pliances  used  by  said  customers  nor  shall  said  grantee  be 
required  to  furnish  gratuitously  any  renewals  of  lamps,  or 
the  recarbonizing  of  any  arc  lamp  or  the  service  of  main¬ 
taining  any  part  of  a  customer’s  installation  ”.  But  the  rate 
to  be  charged  by  the  company  for  such  service  or  maintenance 
was  not  to  exceed  a  rate  which  had  first  been  approved  and 
published  by  the  council,  and  was  not  to  be  unjustly  dis¬ 
criminatory.  The  maximum  lighting  rates  fixed  in  the  or¬ 
dinance  were  as  follows: 

For  residence  lighting,  10  cents  per  kilowatt  hour  for  the  first  52 
hours’  use  per  month,  based  on  a  maximum  demand  of  40  per  cent  of 
the  customer’s  connected  load ;  and  cents  per  kilowatt  hour  for  all 
excess  current  used.  A  minimum  charge  of  $1.11  per  month  was  per¬ 
mitted  for  each  recording  watt  meter. 

For  commercial  lighting,  10  cents  per  kilowatt  hour  for  the  first  52 
hours’  use  per  month  of  the  customer’s  maximum  demand,  and  6f  cents 
per  kilowatt  hour  for  all  excess  current  used,  with  a  minimum  meter 
charge  the  same  as  in  residence  lighting. 

For  power,  7£  cents  per  kilowatt  hour  for  the  first  52  hours’  use  per 
month  of  the  customer’s  maximum  demand,  and  2\  cents  per  kilowatt 
hour  for  all  excess  current  used.  A  minimum  charge  of  $1.11  per 
horsepower  per  month  on  the  aggregate  horsepowers  of  all  motors  in 
use  by  the  customer,  was  permitted. 

On  all  these  rates  a  discount  of  10  per  cent  was  to  be 
allowed  on  bills  paid  within  10  days  from  the  date  of  mailing 
or  delivery.  Quantity  discounts  were  also  to  be  allowed, 
ranging  from  5  per  cent  on  monthly  bills  of  $50  to  25  per 
cent  on  monthly  bills  of  $250  or  more,  with  the  proviso  that 


194 


MUNICIPAL  FRANCHISES. 


no  bill  for  any  given  amount  of  electrical  energy  should  be 
more  than  any  bill  for  a  greater  amount  in  the  same  class  of 
service. 

The  company  was  authorized  to  make  other  schedules  of 
rates  for  lighting,  power,  or  other  purposes,  “  not  incon¬ 
sistent  with  or  higher  than  the  foregoing  rates,  and  for  special 
objects  or  for  special  occasions  ”,  and  was  also  authorized  to 
make  lower  rates  than  those  named  in  the  preceding 
schedules;  but  any  such  rates  had  to  be  tiled  with  the  city 
officials  before  being  put  into  effect,  and  were  to  be  “  without 
unjust  discrimination 

It  was  provided  that  a  customer’s  use  of  current  and  his 
maximum  demand  for  commercial  lighting,  manufacturing 
and  other  light  or  power,  not  including  elevator  power, 
municipal  or  residence  lighting,  were  to  be  determined  by 
meter  readings,  taken  once  each  month.  The  meters  in¬ 
stalled  to  determine  the  amount  of  current  used  and  those 
installed  to  determine  the  maximum  demand,  were  to  be 
subject  to  approval  by  the  city  council.  The  company  was  to 
leave  with  the  customer  a  duplicate  copy  of  all  meter  read¬ 
ings,  upon  which  should  be  printed  easily  understood  direc¬ 
tions  for  determining  the  amount  of  the  bill  to  be  rendered. 
The  company  was  authorized  to  use  the  “  ready-to-serve  ” 
method  for  consumers  having  not  more  than  20  fifty-watt 
lamps  or  their  equivalent.  Maximum  demand  meters,  when 
read,  were  to  be  readjusted  for  the  proper  record  of  the 
following  month’s  demand,  and  the  company  was  required  to 
furnish  its  customers  with  such  extra  number  of  demand 
meters  as  might  be  ordered  by  the  council.  There  was  re¬ 
served  to  the  council  the  right  to  readjust  all  these  rates,  not 
oftener  than  once  a  year,  and  to  fix  and  determine  the  rates 
to  be  charged  either  as  absolute  rates,  maximum  rates  or 
minimum  rates  or  both  maximum  and  minimum  rates. 
Such  rates,  however,  were  required  to  be  “  just  and  reason¬ 
able,  and  not  unjustly  discriminating  between  different  classes 
of  users  ”,  and  were  “  not  to  be  so  fixed  as  to  fail  to  afford 
a  fair  and  reasonable  return  or  profit  upon  said  grantee’s 
capital  investment  in  its  plant  ”.  It  was  provided,  how¬ 
ever,  that  if  the  State  of  Minnesota  should,  by  a  commission 
or  otherwise,  regulate  any  of  the  rates  to  be  charged  by  the 
company,  then,  during  the  period  when  such  rates  were  sub- 


ELECTRIC  LIGHT  FRANCHISES.  195 

ject  to  state  regulation  and  to  the  extent  of  such  regulation, 
action  by  the  council  in  the  matter  should  be  suspended. 

In  case  the  company  found  the  rates  fixed  in  the  ordinance 
or  by  the  city  council  at  any  time  to  be  unreasonable  or  un¬ 
justly  discriminating,  it  was  authorized  to  appeal  to  the 
proper  court  for  an  investigation  and  determination  as  to 
“  what  absolute,  maximum  or  minimum  rates,  or  both,  are 
just  and  reasonable  and  not  unjustly  discriminating,  and  will 
afford,  with  all  other  income  arising  from  the  operation  of  its 
plant,  a  fair  and  reasonable  return  of  profit  upon  such  capital 
investment  in  its  plant  ”. 

The  right  was  reserved  to  the  city  council  to  determine, 
from  time  to  time,  whether  or  not  the  company  should  be  per¬ 
mitted  to  demand  meter  deposits.  The  council  was  author¬ 
ized  also  to  regulate  the  amount  which  might  be  demanded 
and  the  conditions  under  which  such  deposits  might  be  re¬ 
ceived  and  retained  by  the  company.  The  city  reserved  to 
itself  the  right  of  priority,  over  its  own  citizens,  in  the  use 
of  electrical  energy  furnished  or  controlled  by  the  company, 
The  city  also  reserved  the  option,  at  the  end  of  any-  five- 
year  period  during  the  life  of  the  grant,  <e  to  have  an  ap¬ 
praisal  made  of,  and  to  purchase,  the  plant  of  said  grantee  at 
its  then  fair  and  reasonable  value  as  a  going  concern,  having 
regard  to  its  condition  of  repair  and  its  adaptability  and 
capacity  for  generating  and  furnishing  electrical  energy  It 
was  provided  that  “  in  determining  such  value  no  value  shall 
be  placed  on  the  unexpired  term  of  said  grant  or  on  good  will 
or  on  future  profits,  based  upon  such  unexpired  term  In 
case  of  a  disagreement  between  the  city  and  the  company  as 
to  the  value  of  the  property  to  be  purchased,  the  decision  was 
to  rest  with  a  board  of  five  appraisers,  of  whom  two  were  to 
be  selected  by  each  party  and  the  fifth  by  the  four  so  appoint¬ 
ed.  It  was  provided,  however,  that  if  the  company  should 
refuse  or  neglect  to  appoint  two  appraisers,  or  if  the  four 
appraisers  appointed  by  the  city  and  the  company  could  not 
agree  upon  a  fifth  appraiser,  “  then  the  full  bench  of  the  dis¬ 
trict  court  of  the  fourth  judicial  district  of  the  State  of 
Minnesota,  or  a.  majority  of  the  judges  thereof,  may  select 
the  other  appraiser  or  appraisers 99  upon  application  of  either 
the  city  or  the  company.  Such  appraisers,  or  a  majority  of 
them,  were  authorized,  personally  or  by  their  agents,  to  in- 


196 


MUNICIPAL  FRANCHISES. 


spect  the  plant  and  all  the  records  and  documents  of  the  com¬ 
pany  for  the  purpose  of  fully  informing  themselves  in  regard 
to  the  value  of  the  property.  The  city  was  not  to  be  bound, 
however,  to  purchase  the  plant  at  the  price  fixed  by  the  ap¬ 
praisers.  If  it  desired  to  do  so,  its  determination  was  to  be 
expressed  by  an  ordinance  adopted  by  a  two-thirds  vote  of  the 
members  of  the  council,  passed  within  90  days  after  the  re¬ 
port  of  the  appraisal,  and  the  city  was  to  have  three  years 
after  the  expiration  of  the  term  for  which  the  appraisal  was 
made,  in  which  to  pay  the  price.  Meanwhile  the  company 
was  to  retain  possession  of  the  plant,  maintain  it  in  good  con¬ 
dition  and  operate  it  under  the  conditions  of  the  franchise 
until  the  city  paid  for  it.  The  company  was  not  permitted, 
however,  to  make  any  addition  or  extension  or  enlargement 
of  its  plant  after  the  city’s  determination  to  purchase  and 
before  the  purchase  was  made,  without  the  consent  of  the 
council,  in  which  case  the  cost  was  to  be  borne  by  the  city  and 
paid  in  addition  to  the  purchase  price. 

The  term  “  plant  ”  was  defined  as  meaning  “  all  and  every 
part  of  the  property  belonging  to  or  under  the  control  of  the 
grantee,  or  which  is  used  in  the  exercise  of  the  franchises 
mentioned  in  section  25  of  this  ordinance  99 ■ — former  grants 
under  which  the  company  was  operating — cc  and  which  is 
within  the  limits  of  said  city  and  which  is  necessarily  devoted 
to  the  generating  and  furnishing  of  electrical  energy  or  serv¬ 
ice  to  the  city  or  the  inhabitants,  copartnerships  and  corpo¬ 
rations  therein,  including  all  necessary  power  stations  and 
sub-stations,  lands  and  rights  therein,  buildings,  machinery 
and  apparatus  devoted  to  such  service,  as  well  as  all  necessary 
lamps,  poles,  conduits,  cables,  wires  and  other  apparatus 
installed  in  said  city 

It  was  provided  that  no  transfer  of  the  rights  derived  from 
this  franchise,  or  of  any  interest  therein,  should  be  valid  until 
written  notice  stating  the  name  of  the  transferee  had  been 
filed  with  the  city  clerk.  It  was  also  provided  that  the  com¬ 
pany  should  not  sell  the  franchise  or  any  interest  in  it,  or 
any  of  its  property,  to  any  person  or  corporation  “  now  or 
hereafter  operating  or  interested  in  any  other  lighting  or 
power  or  electrical  plant  in  said  city;  nor  make  any  consoli¬ 
dation,  pool  or  division,  with  any  other  such  person,  copartner¬ 
ship  or  corporation,  without  the  consent  of  the  city  council  of 


ELECTRIC  LIGHT  FRANCHISES. 


197 


said  city,  except  that  said  grantee  may  acquire  the  physical 
property  of  the  Minnesota  Brush  Electric  Company  The 
consent  to  any  such  transfer  or  acquisition  required  a  two- 
thirds  vote  of  all  the  members  of  the  council.  It  was  stip¬ 
ulated  that  the  right  granted  by  this  ordinance  should  at  no 
time  and  to  no  extent  “  be  operated  or  used  under  or  by  virtue 
of  any  ordinance  heretofore  granted  for  use  in  the  City  of 
Minneapolis  It  was  specifically  stated  that  the  franchise 
should  not  be  construed  as  an  exclusive  one  or  as  preventing 
the  city  from  acquiring,  owning  and  operating  a  municipal 
electric  lighting  plant  for  public  and  private  use  whenever  it 
desired  so  to  do.  The  company  was  required  to  file  within 
30  days  a  written  acceptance  of  the  ordinance  and  its  con¬ 
ditions,  and  within  six  months  to  file  a  surrender  and  can¬ 
celation  of  all  franchises  and  rights  owned  or  controlled  by 
it,  which  had  been  granted  by  the  city  from  time  to  time  in 
the  past  to  various  companies. 

Mayor  J.  C.  Haynes  vetoed  the  franchise  just  described. 
He  argued  that  the  alleged  right  of  the  council  to  regulate 
rates  was  offset  by  the  company’s  right  to  claim  higher  rates, 
and  that  the  two  together  meant  nothing  but  litigation.  He 
also  urged  that  the  purchase  clause  was  of  no  practical 
value  because  the  city  would  not  be  in  a  position  to  make  use 
of  it.  He  said  that  in  his  judgment  the  only  thing  that 
would  be  “  settled  for  certain 99  by  the  enactment  of  the  ordi¬ 
nance  was  “  that  the  company  will  have  acquired  a  valuable 
30-year  franchise  in  place  of  a  9-year  permit  which  has  been 
repealed  He  urged  that  the  only  way  to  compel  good  serv¬ 
ice  at  reasonable  rates  was  to  provide  for  frequent  renewals 
of  the  franchise,  once  in  10,  or  not  to  exceed  15  years.  He 
also  suggested  that  a  gross  earnings  tax  should  be  fixed,  suffi¬ 
cient  to  provide  for  the  expense  incident  to  the  examination 
of  the  company’s  plant  and  business  whenever  a  readjustment 
of  rates  or  a  purchase  was  proposed.  He  also  called  atten¬ 
tion  to  the  fact,  “  admitted  by  the  company,  that  the  Taylors 
Falls  Power  Company  is  a  separate  and  distinct  corporation 
He  said  it  was  evident  that  the  General  Electric  Company 
“  might  make  a  high  rate  contract  with  the  Taylors  Falls 
Company,  one  very  profitable  to  the  latter,  and  saddle  the  ex¬ 
pense  upon  the  consumers  here  ”.  He  argued  that  the  council 
should  have  the  same  right  to  approve  any  such  power  con- 


198 


MUNICIPAL  FRANCHISES. 


tract  between  these  companies  controlled  by  the  same  people, 
as  it  had  to  determine  the  value  of  the  property  for  other 
purposes.  He  also  urged  that  the  company  should  be  given 
no  considerable  extension  of  time  until  the  valuation  of  its 
plant  had  first  been  determined,  either  by  agreement  or  by 
some  competent  authority. 

As  a  result  of  this  veto,  the  electric  light  situation  in 
Minneapolis  still  remains  unsettled. 

129.  A  franchise  with  many  good  features— St.  Paul — 
The  gas  and  electric  light  business  of  St.  Paul  is  concentrated 
in  the  hands  of  the  St.  Paul  Gas  Light  Company.  By  an  or¬ 
dinance  approved  December  26,  1906,  the  city  granted  a  new 
franchise  to  the  Northern  Heating  and  Electric  Company 
for  a  period  of  25  years.1  This  grant  was  for  pole  lines  and 
conduits  along  “  the  streets,  alleys,  bridges,  parks  and  public 
grounds  of  the  City  of  St.  Paul,  including  any  territory  that 
may  hereafter  be  added  to  the  city  The  company  was  not 
authorized  to  put  up  any  new  overhead  construction  until 
the  council  should  designate  the  particular  locations  to  be 
occupied  for  such  purposes.  For  underground  construction, 
however,  “  except  where  there  is  a  lack  of  suitable  space 
therefor  ”,  the  company  would  need  no  further  authorization. 
The  company  agreed  to  provide  suitable  space  on  all  its  poles 
and  in  all  its  conduits  for  fire  alarm  and  police  signal  con¬ 
ductors  and  to  furnish  and  string  such  wires  at  its  own  ex¬ 
pense.  This  requirement,  however,  both  as  to  space  and  as 
to  the  furnishing  of  wires,  was  limited  to  streets  where  pro¬ 
vision  had  not  already  been  made  for  the  fire  alarm  and  police 
signal  systems. 

The  company  was  required  to  furnish  electricity  to  all  ap¬ 
plicants  without  discrimination  and  at  reasonable  rates,  and 
to  “  exert  every  reasonable  effort  ”  to  furnish  an  ample  supply 
continuously  to  all  its  patrons.  Whenever  the  company 
desired  to  undertake  underground  construction,  it  was 
required  to  file  a  plat  with  the  commissioner  of  public  works, 
showing  the  proposed  location,  and  to  obtain  from  that  official 
a  permit  accurately  and  definitely  designating  the  space  to  be 
occupied.  The  city  reserved  the  right  to  require  the  company 
to  change  the  location  of  any  of  its  fixtures  whenever  the 

1  The  copy  of  this  franchise  consulted  by  the  writer  was  the  official  publication 
in  the  St.  Paul  Daily  News. 


ELECTRIC  LIGHT  FRANCHISES. 


199 


council  deemed  that  such  change  was  required  by  “  the  public 
interest,  necessity  or  safety  ”.  Within  one  year  after  the  work 
of  construction  was  begun,  the  company  was  to  prepare,  in 
convenient  book  or  atlas  form  substantially  bound,  and  file 
with  the  commissioner  of  public  works,  a  map  of  its  fixtures ; 
and  it  was  required  to  bring  this  map  up  to  date  once  each 
year  with  respect  to  extensions  and  new  construction.  This 
franchise,  as  granted,  was  expressly  subject  to  all  the  condi¬ 
tions  and  obligations  contained  in  the  city  charter,  including 
the  filing  of  a  financial  statement  and  the  payment  of  an 
annual  license  fee  of  5  per  cent  of  its  gross  earnings.  The 
city  reserved  the  right,  in  case  it  should  construct  or  operate 
a  system  of  conduits,  tunnels  or  subways  for  general  accom¬ 
modation,  in  the  same  streets  where  this  company’s  fixtures 
were  situated,  to  require  the  company,  at  its  own  expense,  to 
remove  such  fixtures  and  place  them  in  the  city’s  conduits; 
and  the  city  reserved  the  right  to  charge  the  company  a 
reasonable  rental  for  the  space  furnished.  The  company 
was  bound  to  extend  its  lines  for  the  transmission  of  elec¬ 
tricity  upon  any  street  within  six  months  after  being  ordered 
to  do  so  by  the  council.  But  the  council  would  have  no  right 
to  order  any  such  extension  unless  it  was  petitioned  for 
by  residents  who  would  make  use  of  it,  whose  houses  or 
buildings  were  equipped  throughout  for  the  use  of  electricity 
and  who  would  agree  to  become  users  of  current.  For  under¬ 
ground  construction  there  had  to  be  an  average  of  one  such 
house  or  building  for  every  100  feet  of  extension  required, 
exclusive  of  street  crossings;  and  for  overhead  construction, 
an  average  of  one  house  or  building  for  every  300  feet.  The 
five  months  from  December  to  April  were  not  to  be  counted 
in  computing  the  time  within  which  these  extensions  must 
be  made.  Extensions  for  power  could  not  be  required  unless 
there  was  a  demand  for  at  least  an  average  of  two  horsepower 
per  day  for  every  100  feet  of  underground  construction  or 
every  300  feet  of  overhead  construction. 

The  council  reserved  the  right,  “  independent  of  whether 
or  not  the  present  provisions  of  the  city  charter  in  that  behalf 
are  continued  in  force  during  the  life  of  this  franchise  ”,  to 
regulate  the  maximum  prices  to  be  charged,  provided  that 
such  prices  be  fair  and  reasonable.  In  case  the  reasonable¬ 
ness  of  any  rate  fixed  by  the  council  should  be  contested  by 


200 


MUNICIPAL  FRANCHISES. 


the  company  and  carried  to  any  court  of  competent  jurisdic¬ 
tion,  then,  if  such  court  upheld  the  contention  of  the  com¬ 
pany,  it  was  required  in  the  same  action  to  determine  what 
maximum  prices  would  be  fair  and  reasonable.  The  prices 
so  determined  by  the  court,  whether  greater  or  less  than 
those  fixed  by  the  council,  would  be  binding  upon  the  com¬ 
pany  until  the  council  had  taken  further  action  in  the 
matter,  or  “  until  the  conditions  bearing  upon  the  fairness 
and  reasonableness  of  such  maximum  prices  have  materially 
changed  and  the  grantee  shall  again  dispute  the  fairness  and 
reasonableness  thereof  and  carry  such  question  for  litigation 
into  any  court  of  competent  jurisdiction  ”.  The  council  also 
reserved  the  right  to  fix  “  minimum  charges  ”  for  service  and 
to  regulate  the  amount  of  meter  deposits  which  might  be 
required  by  the  company.  Provision  was  made  for  the 
common  ownership  and  the  common  use  of  poles  by  different 
companies,  including  the  grantee.  The  company  was  forbid¬ 
den  to  transfer  its  franchise  or  combine  with  any  other 
electric  company,  without  the  consent  of  the  council. 

It  may  be  remarked  that  while  this  franchise  makes  no 
provision  for  purchase  of  the  plant  by  the  city,  fixes  no 
maximum  rates,  and  does  not  attempt  to  limit  capitalization 
or  to  establish  definitely  the  value  of  the  company’s  prop¬ 
erty,  it  does  embody  an  unusually  large  number  of  valuable 
provisions  regulating  the  detailed  relations  between  the 
city,  the  company  and  the  consumers. 

130.  An  up-to-date  franchise  ordinance  regulating  rates 
—  Chicago. — An  electric  light  franchise  was  granted  by  the 
City  of  Chicago  to  the  Western  Edison  Light  Company  in 
1887,  and  immediately  transferred  to  the  Chicago  Edison 
Company.  In  1897  a  franchise  covering  the  entire  city,  as 
enlarged  at  that  time,  was  granted  to  the  Commonwealth 
Electric  Company.  “  The  franchise  of  this  company  was 
hawked  about  the  streets  until  the  Chicago  Edison  Company 
bought  it  up  ”,  says  the  Committee  of  the  National  Civic 
Federation.1  The  two  companies  were  operated  separately, 
however,  until  about  1907,  when  they  were  consolidated  as 
the  Commonwealth-Edison  Company.  This  company  en¬ 
joyed  a  practical  monopoly  of  all  the  electric  lighting  and 

1  “Municipal  and  Private  Operation  of  Public  Utilities ”  ;  National  Civic  Fed 
eration  Report ;  op.  cit.,  Part  II.,  Vol.  I,  p.  676. 


ELECTRIC  LIGHT  FRANCHISES. 


201 


power  business  in  the  city  at  that  time.  This  was  true  in 
spite  of  the  fact  that  nearly  50  different  franchises  had  been 
granted  from  time  to  time,  either  by  the  city  or  by  different 
towns  and  villages  which  were  later  annexed  to  the  city. 
Most  of  these  had  been  bought  up  by  one  or  the  other  of  the 
two  companies  forming  the  monopoly.  The  Civic  Federation 
investigator  found  it  very  difficult  to  ascertain  the  exact 
status  of  the  old  franchises  in  Chicago,  and  to  determine 
how  far  the  operating  companies  had  lived  up  to  the  obliga¬ 
tions  of  their  franchises.  “  The  city  electrician  has  too  many 
duties  ”,  said  he,  “  to  be  able  to  devote  any  real  part  of  his 
time  to  the  supervision  of  private  companies,  and,  as  stated 
above,  there  seems  to  be  no  official  to  whom  this  duty  of 
supervision  is  specifically  assigned.  It  is  very  difficult,  there¬ 
fore,  to  know  whether  or  not  the  electric  lighting  companies 
of  Chicago  are  obeying  the  terms  of  their  franchises.  There 
is  no  recollection  of  any  pains  or  penalties  inflicted  upon  an 
electric  lighting  company  for  failure  to  comply  with  its 
obligations,  except  in  the  case  of  a  few  small  plants  whose 
franchises  have  lapsed  because  of  a  failure  to  continue  in 
business  the  length  of  time  stipulated  in  their  forfeiture 
clauses.  It  may  be  that  all  the  electric  companies  are  obey¬ 
ing  their  ordinances  in  every  detail.  The  City  Hall  has  few 
facilities  for  making  any  discoveries  to  the  contrary 
Further  on,  the  investigator  states  that  “  the  city  has 
required  very  few  things  which  the  companies  would  not 
naturally  do  of  their  own  accord,  and  that  with  regard  to 
other  things,  which  the  companies  would  prefer  not  to  do,  the 
city  makes  no  adequate  provision  for  finding  out  whether 
they  do  them  or  not  ”.2  He  adds,  however,  that  “  the  most 
recent  franchises  have  been  drawn  with  a  considerable  degree 
of  care.  In  fact,  it  may  be  said  that  the  art  of  drawing  fran¬ 
chises  in  Chicago  has  shown  enormous  improvement  during 
the  last  five  years  ”. 

The  old  Edison  franchise  of  1887  was  granted  for  a  period 
of  25  years.  The  Commonwealth  Electric  franchise  of  1897 
was  granted  for  a  period  of  50  years  and  provided  that  after 
the  expiration  of  five  years  from  the  date  of  the  grant  the 
company  should  pay  the  city  3  per  cent  of  its  gross  receipts. 

1  Special  Report,  1907,  op.  cit.,  Part  II.,  Volume  I,  p.  718. 

a  Ibid.,  p.  745. 


202 


MUNICIPAL  FRANCHISES. 


The  General  Assembly  of  Illinois  passed  an  act  in  1905/  au¬ 
thorizing  Chicago  to  prescribe  by  ordinance  the  maximum 
Tates  and  charges  for  the  supply  of  gas  and  electricity  for 
power,  heating  and  lighting,  furnished  by  any  individual  or 
corporation  to  the  city  and  its  inhabitants.  Under  these 
circumstances,  the  city  council  passed  an  ordinance  March 
23,  1908,  prescribing  maximum  rates  to  be  charged  by  the 
Commonwealth-Edison  Company  for  the  period  ending  July 
31,  1912.1 2 

For  “  electricity  for  lighting,  or  upon  an  interior  dis¬ 
tributing  circuit  carrying  electricity  for  lighting  and  also 
for  heating  or  power  through  the  same  meter,  to  an  extent 
not  exceeding  the  equivalent  of  30  hours’  use  per  month  of 
the  consumer’s  maximum  requirement  ”,  the  maximum  rate 
was  to  be  15  cents  per  kilowatt  hour  until  July  31,  1908; 
and  13  cents  thereafter.  For  additional  current  the  rate  was 
to  be  not  more  than  9  cents  per  kilowatt  hour  until  July 
31,  1908;  8  cents  for  the  year  following  that  date;  and  7 
cents  for  the  period  from  August  1,  1909,  to  July  31,  1912. 
It  was  stipulated  that  these  rates  “  shall  cover  and  include 
for  incandescent  lighting  the  free  installation  and  use  of  the 
proper  supply  of  incandescent  lamps  The  company  was 
also  required  to  furnish  renewals  of  worn-out  lamps  free, 
“  except  in  cases  where  unusual  conditions  or  manner  of  use 
shall  materially  shorten  the  normal  life  of  lamps  and  require 
excessive  renewals  If  a  customer  furnished  his  own  in¬ 
candescent  lamps,  he  was  to  receive  an  “  abatement  ”  of  half 
a  cent  per  kilowatt  hour  from  the  established  rates. 

For  power  “  upon  a  power  circuit  to  an  extent  not  exceed¬ 
ing  the  equivalent  of  30  hours’  use  per  month  of  the  con¬ 
sumer’s  maximum  requirements  ”,  the  maximum  rate  was  to 
be  11  cents  per  kilowatt  hour,  with  a  minimum  charge  of  not 
more  than  50  cents  per  month  “  for  each  horsepower,  or 
fraction  thereof,  in  rated  capacity  of  motor  or  motors  con¬ 
nected  For  electricity  upon  a  powTer  circuit  other  than 

for  power  to  operate  elevators,  hoists  or  similar  machinery, 
the  rate  on  the  current  required  in  excess  of  the  equivalent 

1  Act  approved  May  18,  1905. 

2  The  original  report  or  the  Committee  on  Gas,  Oil  and  Electricity  to  the  City 
Council  recommending  the  passage  of  this  ordinance,  was  presented  March  26, 
1906.  See  Proceedings  of  City  Council,  1906,  p.  3217. 


ELECTRIC  LIGHT  FRANCHISES.  203 

of  30  hours’  use  per  month  of  the  maximum  requirement, 
was  fixed  at  6  cents  per  kilowatt  hour. 

All  the  rates  described  above  were  subject  to  a  discount  of 
1  cent  per  kilowatt  hour  on  bills  paid  within  10  days  from 
date,  and  it  was  stipulated  that  “no  such  bill  shall  bear  a 
date  prior  to  that  of  its  actual  mailing  or  delivery  It  was 
provided  that  every  bill  should  “  show  the  exact  computation 
by  which  the  charges  are  fixed  v  These  rates  were  to  apply 
“  only  to  the  usual  and  regular  supplying  of  electricity  ”  and 
were  not  made  applicable  to  emergency  use  such  as  break¬ 
down  service.  It  was  provided  that  “  all  rates  to  be  charged 
for  supplying  electricity  by  said  company  shall  be  reason¬ 
able;  there  shall  be  no  unlawful  or  unjust  discrimination 
in  such  rates,  and  all  customers  of  said  company  shall  be 
allowed  like  rates  under  substantially  like  circumstances  and 
conditions  ”,  The  company  was  required  to  publish  regular 
schedules  of  all  its  established  rates. 

A  notable  feature  of  this  ordinance  was  the  provision  that 
the  voltage  of  any  of  the  company’s  “  distributing  lines  from 
which  electricity  for  lighting  purposes  is  furnished,  shall,  as 
measured  at  the  consumer’s  service,  not  vary  more  than  5  per 
cent  either  above  or  below  the  normal  voltage  carried  by  the 
circuit  upon  which  the  service  is  rendered  ”,  except  in  case 
of  variations  due  to  accidents  or  load  conditions  not  in  the 
immediate  control  of  the  company. 

It  was  stipulated  that  by  the  acceptance  of  the  ordinance, 
the  company  should  “  be  understood  as  consenting  for  itself 
(but  not  for  mortgage-trustees  or  bondholders  under  existing 
mortgages)”,  that  the  city  might  at  its  pleasure  declare 
terminated  and  void  any  or  all  of  a  list  of  23  electric  fran¬ 
chise  ordinances  passed  in  former  years  by  the  local  author¬ 
ities  and  “  understood  ”  to  have  been  owned  or  claimed  by 
either  the  Chicago  Edison  Company  or  the  Commonwealth 
Electric  Company.  Any  property  already  installed  under  any 
of  these  ordinances  and  acquired  by  either  of  the  companies 
named,  was  to  “be  maintained  and  operated  respectively 
according  to  such  ownership  under  and  subject  to  the  terms 
and  limitations  of  the  respective  ordinances  under  which  said 
two  companies  respectively  operated  at  the  time  of  their  con¬ 
solidation  ”.  These  two  particular  ordinances  were  expressly 
ratified  and  confirmed,  “  according  to  their  respective  terms, 


204 


MUNICIPAL  FRANCHISES. 


throughout  the  entire  territory  of  said  city,  as  now  existing 
and  as  hereafter  at  any  time  or  times  extended  by  annexation 
or  otherwise  ”,  but  this  ordinance  was  not  to  be  understood  as 
in  any  way  extending  the  periods  for  which  the  original  fran¬ 
chises  were  granted.  It  was  stipulated  that  these  two  or¬ 
dinances  were  to  be  considered  as  the  only  ordinances  under 
which  the  two  companies  were  operating  or  were  entitled  to 
operate  their  respective  plants  and  distribution  systems  at 
the  time  of  their  consolidation.  The  3  per  cent  gross  receipts 
tax  was  extended  by  the  ordinance  to  cover  all  the  plants 
operated  by  the  consolidated  company  and  was  to  be  based 
upon  receipts  from  electricity  “  distributed,  delivered  or 
used  ”  in  the  city  whether  generated  by  the  company  or  pur¬ 
chased  by  it.  By  this  ordinance  the  city  consented  to  the 
consolidation  of  the  companies,  but  expressly  refrained  from 
conceding  to  the  consolidated  company  “  the  right  to  main¬ 
tain  or  operate  in  the  streets  or  public  ways  of  the  City  of 
Chicago  any  particular  property  now  existing  therein,  after 
the  expiration  of  the  ordinance  under  which  such  property 
was  maintained  and  operated  at  the  time  of  said  consolida¬ 
tion,  by  the  particular  one  of  said  two  constituent  corpora¬ 
tions  (said  Chicago  Edison  Company  or  said  Commonwealth 
Electric  Company)  from  or  through  which  such  property  was 
acquired  It  was  further  provided  that  “  all  applications  for 
permits  for  the  repair  or  renewal  of  conduits  or  other  equip¬ 
ment  owned  or  claimed  by  said  Commonwealth-Edison  Com¬ 
pany,  in  the  streets  or  public  ways  of  the  City  of  Chicago, 
shall  truly  set  forth  which  of  said  two  constituent  companies 
owned  or  claimed  to  own,  at  or  prior  to  their  consolidation, 
the  conduits  or  other  equipment  to  be  repaired  or  renewed, 
and  repairs  or  renewals  shall  be  in  all  respects  held  and  con¬ 
sidered  as  a  part  of  the  conduits  or  equipment  repaired  or 
renewed 

By  a  section  amending  the  Commonwealth  Electric  fran¬ 
chise  of  1897,  this  ordinance  provided  that  in  the  outlying 
districts,  where  pole  lines  were  maintained,  the  city  should 
have  the  right  to  use,  free  of  charge,  one  cross-arm  on  each 
pole  for  its  telegraph  and  telephone  wires  and  also  “  for  city 
lighting  wires  distributing  electricity  generated  by  said  city 
for  lighting  streets  or  for  light  or  power  for  public  buildings 
only  and  having  a  voltage  not  exceeding  5,000  in  any  in- 


ELECTRIC  LIGHT  FRANCHISES. 


205 


stance,  not  including,  however,  power  for  pumps  in  the 
municipal  water  works  ”.  If  the  city  used  this  cross-arm  for 
conveying  electricity  generated  by  the  Sanitary  District  of 
Chicago,  it  was  to  pay  the  company  “  a  just  and  fair  pro¬ 
portionate  share  of  a  reasonable  return  upon  the  cost  of  ac¬ 
quiring,  erecting  and  maintaining  such  poles  ”.  Wherever 
the  underground  system  was  in  use,  the  company  was  au¬ 
thorized,  under  the  amended,  as  under  the  original  ordinance, 
to  bring  its  conductors  to  the  surface  within  every  four  blocks 
and  carry  them  over  the  roofs  of  the  houses,  with  the  consent 
of  the  owners,  or,  if  such  consent  could  not  be  obtained,  then 
to  carry  them  on  poles  in  the  alleys. 

The  provision  in  the  ordinance  of  1908  in  regard  to  pub¬ 
licity  of  accounts  deserves  particular  attention.  The  company 
was  required,  upon  request  of  the  city  comptroller,  not 
oftener  than  once  a  year,  to  “  furnish  all  reasonable  informa¬ 
tion  necessary  to  enable  said  city  fairly  to  exercise  such  law¬ 
ful  authority  as  said  city  may  at  the  time  of  such  inquiry  or 
proceeding  possess  in  respect  to  regulating  or  prescribing  the 
rates  and  charges  of  said  company  for  supplying  electricity  ”. 
The  company  was  also  required,  “  for  the  purpose  of  afford¬ 
ing  the  City  of  Chicago  opportunity  to  verify  the  information 
so  furnished  or  to  obtain  further  information  needed,  or  for 
the  purpose  of  ascertaining  whether  the  provisions  of  this 
ordinance  shall  have  been  complied  with  during  the  pre¬ 
ceding  year  ”,  to  “  permit  all  its  books  of  account  and  other 
books  and  papers  to  be  examined,  so  far  as  necessary,  on 
behalf  of  the  City  of  Chicago,  not  oftener  than  once  in  each 
year,  by  accounting  or  electrical  experts,  or  both  ”,  selected 
by  the  city.  In  case,  however,  any  expert  chosen  by  the  city 
should  be  objectionable  to  the  company,  the  company  was  to 
give  the  city  comptroller  written  notice  to  that  effect  within 
30  days.  If  the  city  did  not  wish  to  yield  to  the  company’s 
objections,  it  could  submit  the  case  to  the  person  acting  as 
Probate  Judge  of  Cook  County,  whose  personal  decision  as 
to  the  fitness  of  the  expert  was  to  be  final  and  binding.  If 
this  arbiter  decided  against  the  city’s  nominee,  the  city  was 
required  to  make  a  new  selection.  The  city  comptroller  was 
required,  upon  request  of  the  company,  to  recall  from  further 
participation  in  the  work  of  examining  the  company’s  ac¬ 
counts,  any  person  or  persons  employed  in  such  an  examina- 


20G 


MUNICIPAL  FRANCHISES. 


tion,  who  should  “  be  made  to  appear ”  to  be  engaged  in 
“  unfair  practices  ”.  The  city  was  required  to  “  treat  as  con¬ 
fidential  for  itself,  its  officers  and  its  duly  authorized  -rep¬ 
resentatives,  the  detailed  information  furnished  to  it  by  said 
company,  or  obtained  by  it  from  examinations  of  said  com¬ 
pany’s  books  and  papers,  except  as  publicity  in  respect  to  the 
manufacturing  and  supplying  of  electricity  and  of  lamps 
may  seem  to  said  city  to  be  required  or  to  be  advisable  in  the 
public  interest,  to  the  end  that  the  details  of  said  company’s 
accounts  or  affairs  or  business  methods,  especially  in  the  mer¬ 
cantile  branch  of  its  business,  may  not  unnecessarily  become 
public  and  be  disclosed  to  its  business  competitors  or  to  per¬ 
sons  having  adverse  business  interests 

The  company  agreed,  by  the  acceptance  of  the  ordinance, 
not  to  increase  its  rates  after  the  expiration  of  the  period  for 
which  the  rates  were  fixed  by  the  ordinance. 

Special  permission  was  given  to  the  company  by  this  or¬ 
dinance,  to  acquire  the  conduits  laid  in  certain  streets  by  the 
Chicago  Sectional  Electric  Underground  Company,  under  a 
franchise  passed  July  31,  1882,  which  had  expired  in  1907, 
and  to  permit  the  space  in  these  conduits  occupied  at  the  time 
by  other  companies  under  leases  from  the  former  owner,  to 
continue  to  be  so  used  until  otherwise  ordered  by  the  city. 
In  consideration  of  this  special  privilege  of  renting  space  in 
these  conduits  to  other  parties,  the  company  was  to  pay  the 
city  10  per  cent  of  its  gross  rentals  or  revenues  from  this 
particular  branch  of  its  business. 

131.  Power  from  Niagara  Falls— Buffalo. — On  December 
3,  1881,  the  common  council  of  Buffalo  passed  a  resolution 
granting  a  franchise  to  the  Brush  Electric  Light  Company.1 
This  resolution  was  vetoed  by  the  Mayor,  with  the  sugges¬ 
tion  that  it  be  so  modified  as  to  include  a  franchise  to  the 
United  States  Electric  Light  Company  also,  and  such  other 
companies  as  might  thereafter  apply  for  the  same  privilege. 
“  This  course,”  said  the  Mayor,  “  is  desirable  in  order  that 
there  may  be  competition  in  the  business,  and,  further,  that 
the  streets  may  not  be  overburdened  with  poles,  since  an  ar¬ 
rangement  can  doubtless  be  made  by  which  the  various  com- 

1  “  Franchises  Granted  to  the  Brush  Electric  Light  Co.  of  Buffalo,  the  United 
States  Electric  Lighting  Co.  of  New  York  and  Thomson-Houston  Electric  Light 
and  Power  Co.  of  Buffalo,  now  constituting  the  Buffalo  General  Electric  Co.,” 
1905,  p.  1. 


ELECTRIC  LIGHT  FRANCHISES. 


207 


panies  will  use  one  set  of  poles  ”.  In  accordance  with  the 
Mayor’s  suggestions,  a  new  resolution  was  passed  by  the 
council  December  12,  1881,  granting  a  franchise  to  both  the 
companies  mentioned  above.  Under  this  franchise  the  ter¬ 
ritory  covered  by  certain  specified  streets  was  divided  be¬ 
tween  the  two  companies,  for  the  construction  and  main¬ 
tenance  of  pole  lines;  but  each  company  was  authorized  to 
operate  in  the  other  company’s  territory,  using  the  other  com¬ 
pany’s  poles.  The  council  also  included  a  general  provision  in 
this  franchise,  giving  “  any  responsible  corporation  desiring 
to  work  an  incandescent  light  in  the  City  of  Buffalo”,  the 
right  to  lay  wires  along  any  of  the  streets  enumerated  in  this 
franchise,  in  tubes  underground. 

In  1887  the  city  adopted  an  ordinance  authorizing  any 
person  or  company  desiring  to  place  a  conduit  for  electric 
light  wires  under  the  streets,  to  do  so  on  condition  that  these 
conduits  should  be  of  sufficient  capacity  to  accommodate  the 
wires  of  such  person  or  company  and  all  other  electric  light 
wires  in  use  in  the  street  on  July  1,  1887,  and  also  of 
capacity  to  allow  an  increase  of  electric  wires  of  at  least  50 
per  cent  over  the  number  then  in  use  in  the  street.  Any 
other  company  already  having  overhead  wires  in  the  same 
street  was  to  be  entitled  to  use  the  new  company’s  conduits 
on  such  terms  as  might  be  agreed  upon  by  the  two  companies. 
If  they  could  not  agree,  the  matter  was  to  be  submitted  to 
arbitration,  each  company  appointing  one  arbitrator  and  the 
mayor  appointing  as  the  third  “  some  disinterested  citizen 
and  tax-payer”. 

The  Thomson-Houston  Electric  Light  and  Power  Com¬ 
pany  having  secured  a  franchise  in  1887,  consolidated  with 
the  Brush  Company  five  years  later  to  form  the  Buffalo  Gen¬ 
eral  Electric  Company,  thereby  establishing  a  monopoly  in 
the  actual  supply  of  electric  current  in  Buffalo. 

Things  went  along  in  the  usual  way  until  the  utilization 
of  Niagara  Falls  for  the  development  of  power  was  accom¬ 
plished.  The  Niagara  Falls  Power  Company  was  incor¬ 
porated  under  another  name  by  the  state  legislature  as  early 
as  1886. 1  By  chapter  477  of  the  laws  of  1893,  this  company, 
its  successors  and  assigns,  were  authorized  and  empowered  in 
any  manner  not  expressly  prohibited  by  law  or  by  lawful 

1  See  report  of  Corporation  Counsel  to  the  Common  Council,  Sept.  12, 1908. 


208 


MUNICIPAL  FRANCHISES. 


local  ordinance,  to  conduct,  convey  and  furnish  any  power, 
heat  or  light,  developed  from  the  waters  of  Niagara  River,  to, 
in  and  through  any  civil  division  of  the  state  and  to  sell  and 
deliver  the  same  to  any  and  all  bodies  or  persons,  public  or 
private,  wherever  situate.  For  any  of  these  purposes,  the 
company  was  authorized  from  time  to  time  to  enter  upon  any 
private  property  for  which  it  might  obtain  the  right  “  or 
upon  any  public  bridge  or  street,  highway,  road,  land  or 
water  ”,  and  to  use  the  ground  thereunder  and  to  use  and 
occupy  “  any  portion  of  any  such  street,  highway  or  road,  or 
any  such  public  land  or  water,  in  such  manner  as  shall  from 
time  to  time  be  permitted  by  the  local  or  public  authority 
having  control  or  supervision  thereof  ”,  subject  to  private 
rights.  On  December  16,  1895,  the  common  council  of  the 
City  of  Buffalo  granted  to  the  Niagara  Falls  Power  Company 
and  to  the  Niagara  Falls  Hydraulic  Power  and  Manufactur¬ 
ing  Company  permission  to  erect  and  maintain  pole  lines  and 
conduits  in  the  streets  of  the  city.  This  grant  was  assigned, 
with  the  consent  of  the  council,  October  5,  1896,  to  the 
Cataract  Power  and  Conduit  Company.  It  is  understood 
that  the  Niagara  Falls  Power  Company  develops  the  electric 
current  at  the  Falls,  and  the  Cataract  Power  and  Conduit 
Company  distributes  the  power  in  the  city,  the  two  companies 
being  under  common  control. 

In  his  annual  message  to  the  common  council,  January  1, 
1906,  Mayor  James  N.  Adam  said:  1 

“The  lighting  question  has  come  to  be  identified  closely  with  the 
power  question  in  our  municipality.  For  some  years  Buffalo  has  been 
heralded  far  and  wide  as  the  Electric  City  and  as  the  Power  City. 
Amid  popular  acclaim  Niagara  power  was  transmitted  to  Buffalo.  It 
was  to  be  so  cheap  that  coal  would  be  at  a  discount  and  steam  give  way 
to  electricity  in  our  industries.  It  was  a  momentous  matter  for  our 
city.  It  was  to  mean  much  in  the  upbuilding  and  developing  of  our 
industrial  life  and  material  prosperity.  We  granted  a  liberal  franchise 
ten  years  ago  to  a  private  corporation  to  use  our  streets  and  sell  that 
power.  The  ten  years  have  passed  and  I  state  only  the  plain  truth 
when  I  say  that  the  manufacturers  and  business  men  of  Buffalo  have 
found  themselves  enjoying  little  if  anything  more  in  the  way  of  cheap 
power  than  they  had  before  the  electric  power  came.” 

Discussing  the  rate  charged  the  city  for  power  by  the  com¬ 
panies,  the  Mayor  said : 

“I  believe  the  city  should  invite  genuine  and  permanent  competition 
on  a  basis  certain  to  have  the  price  of  power  reduced  and,  if  necessary, 

1  Page  34. 


ELECTRIC  LIGHT  FRANCHISES.  209 

the  city  should  generate  its  own  power  and  have  its  own  power  plant 
in  conjunction  with  its  reserve  pumping  station.” 

He  stated  emphatically  that  he  did  not  think  the  city 
should  be  at  the  mercy  “  of  the  one  electric  light  and  power 
combination  which  in  Buffalo  holds  franchises  as  the  Buffalo 
General  Electric  Company  and  the  Cataract  Power  and  Con¬ 
duit  Company  After  citing  evidence  that  the  citizens  had 
to  pay  from  10  cents  to  12  cents  per  kilowatt  hour  for 
residence  lighting,  while  the  street  railway  paid  about  one- 
lialf  cent  per  kilowatt  hour  for  lighting  its  cars,  he  said : 

“Clearly,  electric  power  lias  been  no  reducer  of  the  cost  of  lighting 
to  our  home-owners.  It  simply  has  meant  a  more  expensive  form  of 
lighting  than  was  known  before.” 

In  his  message  to  the  council  a  year  later,  January  7, 
1907,  Mayor  Adam  stated  that  the  minimum  rate  for  power 
offered  to  Buffalo  was  $25  per  horsepower  per  year,  while 
the  maximum  rates  in  Toronto  and  other  Canadian  cities 
farther  from  the  Falls  than  Buffalo,  were  less  than  $18. 1 

132.  Perpetual  franchises  with  practically  no  condi¬ 
tions  attached— New  York  City. — The  only  interesting  thing 
about  the  electric  light  and  power  franchises  of  New  York 
City  is  the  magnitude  of  the  privileges  involved  and  the  ab¬ 
sence  of  any  appreciable  restrictions  upon  the  companies  for 
the  protection  of  the  public  interest.  According  to  the  report 
of  the  Public  Service  Commission  for  the  First  District,  of 
the  total  electric  current  supplied  in  Greater  New  York, 
during  the  year  ending  June  30,  1907,  75.93  per  cent  was 
furnished  by  companies  in  the  Consolidated  Gas  Company’s 
system,  and  22.74  per  cent  more  was  furnished  by  allied 
systems  and  companies,  leaving  1.33  per  cent  of  the  total  fur¬ 
nished  by  independent  companies.2  There  is  no  actual  com¬ 
petition  between  electric  light  companies  anywhere  in  Greater 
New  York.  While  there  are  nine  operating  companies,  the 
territory  is  divided  so  that  only  one  company  operates  in  the 
same  district,  except  in  the  Borough  of  Manhattan,  where 
two  companies,  both  controlled  by  the  Consolidated  Gas  Com¬ 
pany,  are  operating.  The  magnitude  of  the  interests  involved 
is  shown  by  the  fact  that  the  various  companies  had  84,474 
consumers,  while  a  total  of  about  400,000,000  kilowatt  hours 

1  Page  24. 

a  Annual  Report  for  year  ending  Dec.  81,  1007,  Volume  II.,  p.  458. 


210 


MUNICIPAL  FRANCHISES. 


of  electrical  current  was  generated  during  the  year.  The 
combined  revenue  of  the  electrical  companies  of  New  York 
City  for  the  same  year  was  about  $19,500,000.  The  fran¬ 
chises  under  which  this  enormous  business  was  carried  on, 
were  granted  from  time  to  time,  from  1881  to  1897,  by  29 
different  municipalities  ranging  in  population  from  the  old 
City  of  New  York,  with  its  2,000,000  people,  to  various  towns 
and  villages  in  Queens,  Richmond  and  Westchester  Counties, 
with  only  a  few  thousand  inhabitants  each.  Practically  all 
these  franchises  are  perpetual.  The  franchises  granted  by  the 
highway  commissioners  of  a  single  tbwn  in  the  Borough  of 
Queens  cover  an  area  greater  than  the  whole  of  Manhattan 
Island ;  and,  as  these  franchises  are  perpetual,  they  are  likely 
to  be  used  in  the  future  in  the  service  of  an  enormous  popula¬ 
tion.  In  the  old  City  of  New  York  the  only  compensation 
required  under  the  original  electrical  franchises,  was  one  cent 
per  lineal  foot  of  the  streets  opened  for  underground  work; 
and,  as  a  few  years  later  a  system  of  electrical  subways  was 
constructed  in  which  the  electric  light  companies  were  re¬ 
quired  to  place  all  their  wires,  even  this  munificent  payment 
to  the  city  ceased.  In  a  bunch  of  these  franchises  granted  by  a 
single  resolution  in  1887,  the  board  of  aldermen  went  so  far 
as  to  require  the  companies  to  furnish  also  one  free  street  arc 
light  for  every  fifty  arc  lights  furnished  to  private  consumers. 
This  provision,  however,  has  long  since  been  outgrown,  inas¬ 
much  as  the  companies  now  operating  not  only  hold  some  fran¬ 
chises  which  do  not  require  free  lighting,  but  also  are  able  to 
make  the  claim  that  they  furnish  current  only,  not  arc  lights 
as  in  the  early  years  of  the  business.  About  the  only  condi¬ 
tion  of  practical  interest  in  the  electric  lighting  franchises  of 
Greater  New  York,  is  a  provision  in  the  franchises  granted  by 
some  of  the  former  towns  and  villages  on  Staten  Island, 
requiring  the  company  to  furnish  free  lights  for  public  build¬ 
ings,  including  schools,  churches,  town  halls  and  fire  depart¬ 
ment  houses.  This  provision  was  brought  to  light  after  the 
establishment  of  the  Public  Service  Commission  in  1907, 
and  since  that  time  some  of  the  churches  in  Tottenville  have 
been  securing  free  lights. 

The  only  mitigation  of  the  evils  of  monopoly  which  the 
people  of  New  York  have,  comes  from  the  power  of  the 
legislature  and  the  Public  Service  Commission  to  regulate 


ELECTRIC  LIGHT  FRANCHISES. 


211 


Tates  and  service  and  supervise  the  corporate  activities  of  the 
companies.  In  the  future  it  will  be  impossible  for  electric 
lighting  companies  in  New  York  City  to  capitalize  their  fran¬ 
chises.  The  Public  Service  Commission  has  also  established  a 
uniform  system  of  accounts  for  electrical  corporations,  which 
will  undoubtedly  prevent  the  repetition  of  the  financial  jug¬ 
gleries  of  the  past.  In  his  report  upon  uniform  systems  of 
accounts,  under  date  of  December  7,  1908,  Commissioner  Milo 
R.  Maltbie  described  the  purposes  of  the  law  as, 

(1.)  “To  establish  uniformity  between  all  corporations  of  the  same 
class.” 

(2.)  “To  establish  systems  of  accounts  which  will  show  clearly  and 
accurately  the  specific  source  of  all  income  and  the  purpose  of  every 
expenditure.” 

(3.)  “To  state  the  fundamental  principles  according  to  which 
accounts  shall  be  kept,  so  as  to  prevent  the  charging  of  items  to  wrong 
accounts  ”  1 

“  The  danger  upon  the  one  hand,”  said  the  Commissioner,  “  is  that  a 
sufficient  amount  will  not  be  expended  or  set  aside  to  keep  the  property 
of  the  company  up  to  the  proper  standard.  *  *  *  *  The  other  danger, 
with  which  we  have  had  less  experience  so  far,  is  that  an  undue  amount 
will  be  taken  out  of  earnings  and  spent  upon  the  plant,  usually  in  the 
form' of  extensions.” 

Referring  to  the  three  schedules  prescribed  for  gas,  elec¬ 
trical  and  street  railway  companies,  the  Commissioner  said : 

“  The  primary  purpose  of  the  three  systems  of  accounts  is  to  insure 
the  integrity  of  ‘  capital  ’  and  the  correctness  of  the  charges  to  ‘  cost  of 
operation.’  ” 

133.  Simple  franchises  controlled  by  a  state  board— 
Massachusetts.— In  reply  to  an  inquiry  from  the  New  York 
Public  Service  Commission,  relative  to  lighting  franchises  in 
Massachusetts,  Mr.  F.  E.  Barker,  Chairman  of  the  Massa¬ 
chusetts  Board  of  Gas  and  Electric  Light  Commissioners, 
made  the  following  statement : 2 

“Permits  to  lay  gas  pipes,  underground  electric  conduits  or  over¬ 
head  electric  lines  are  issued  by  the  local  authorities  (aldermen  of  cities 
and  selectmen  of  towns)  under  the  provisions  of  the  statutes  enacted 
therefor.  Such  licenses  are  not  granted  for  a  fixed  term,  neither  is  it 
customary  for  the  local  authorities  to  prescribe  such  terms  and  condi¬ 
tions  as  would  relate  to  prices,  quality  of  light,  compensation,  etc. 
No  authority  to  prescribe  such  conditions  is  contained  in  the  law  and  it 
is  very  doubtful  if  they  would  be  effective  if  their  imposition  were 
attempted  unless,  of  course,  under  some  voluntary  contract  executed 
between  the  company  and  the  municipality. 

“  Although  the  questions  involved  have  never  been  passed  upon  by  the 

1  See  Report  of  the  Commission,  reprinted  from  Proceedings  of  Dec.  8, 1908. 

*  Letter  to  Commissioner  Milo.R.  Maltbie,  dated  June  2,  1908. 


212 


MUNICIPAL  FRANCHISES. 


court,  it  is  good  opinion  that  the  statutes,  which  were  originally  passed 
for  telephone  or  telegraph  companies  solely  for  interurban  communica¬ 
tion  and  were  later  transferred  bodily  to  the  benefit  of  electric  light 
companies,  make  it  compulsory  upon  the  municipality  to  grant  reason¬ 
able  locations  for  electric  light  lines,  that  the  authority  to  place  gas 
mains  in  the  streets  is  derived  directly  from  the  legislature  and  that 
the  local  authorities  are  bound  to  permit  such  work  to  be  done  and  can 
do  no  more  than  prescribe  reasonable  regulations  therefor.  The  statute 
contains  express  provisions  for  the  relocating  of  electric  poles,  but  no 
other  provisions  for  revoking  privileges  once  granted  in  the  public 
highway  so  long  as  the  land  appropriated  therefor  continues  to  be  so 
used.  At  the  same  time  the  courts  have  held  that  if  the  street  in  which 
these  privileges  are  exercised  is,  in  the  manner  provided  by  law,  dis¬ 
continued  as  a  public  way,  the  companies  having  lines  in  such  street 
are  bound  to  remove  them  or  lose  them  without  compensation  therefor. 

“The  question  of  the  value  and  permanency  of  such  privileges  and 
of  strvictures  erected  under  them  has  occasionally  arisen  where  they 
were  found  to  occupy  locations  in  which  the  municipality  desired  to 
lay  its  conduits,  as  for  water  supply  or  sewerage.  Under  such  condi¬ 
tions  municipalities  have  generally  insisted  upon  their  right  to  remove 
or  break  through  the  conduits  of  the  company  without  being  required 
to  make  any  compensation  therefor;  and  although  companies  have 
made  claims  for  damages,  these  have  generally  been  amicably  adjusted 
or  allowed  by  the  company  to  languish,  and  the  company’s  mains  or 
conduits  have  been  placed  in  a  new  location.  Even  though  the  con¬ 
tention  of  the  municipality  under  such  conditions  might  be  sustained, 
I  suppose  it  might  nevertheless  be  found  that  the  municipality  had  no 
right  to  revoke  such  privileges  except  for  reasons  affected  by  a  public 
interest.  This  Board  has  no  authority  whatever  in  such  a  case  and 
nothing  whatever  to  do  with  the  grantingof  specific  locations  for  poles 
for  electric  lines,  gas  pipes  or  underground  electric  conduits  and 
wires.” 

As  in  New  York  City,  the  main  dependence  of  the  people  of 
Massachusetts  cities  is  on  the  effective  regulation  of  capitaliza¬ 
tion,  extensions,  improvements,  service  and  rates,  which  is 
exercised  by  the  state  board  having  supervision  over  gas  and 
electric  companies. 

134.  Most  important  features  of  an  electric  light,  heat 
and  power  franchise. — It  is  easy  to  make  franchises  so  long 
and  complex,  and  their  provisions  so  minute,  as  to  take  away 
the  flexibility  in  the  operations  of  the  company  and  its  rela¬ 
tions  with  the  public  authorities  which  is  desirable  if  the 
utility  is  to  be  progressively  developed.  There  is  also  danger 
that  the  gist  of  important  provisions  may  be  lost  in  excess 
verbiage.  There  are  a  few  fundamental  matters,  however, 
which  should  be  treated  in  every  franchise. 

In  the  first  place,  there  is  the  all-important  question  of 
rates.  Inasmuch  as  both  efficiency  and  economy  speak  for 
monopoly  in  the  furnishing  of  electric  light  and  power,  it  is 


ELECTRIC  LIGHT  FRANCHISES. 


213 


unwise  to  depend  upon  competition,  to  any  degree,  for  the 
control  of  rates.  A  franchise  should,  therefore,  provide  a 
schedule  of  maximum  rates,  with  proper  provision  for  re¬ 
adjustment  of  rates  from  time  to  time,  based  upon  ascertained 
facts  as  to  the  cost  of  production  and  distribution  of  electric 
current.  The  company  should  be  required  to  publish  and  file 
with  the  proper  city  authorities  all  its  rate  schedules  in 
advance  of  their  going  into  effect. 

Discrimination  between  individuals  using  electric  current 
under  approximately  similar  conditions,  should  be  absolutely 
prohibited.  “  Unjust 99  discrimination  between  classes  of 
users,  that  is  to  say,  any  discrimination  which  tends  to  give 
an  economic  advantage  to  one  class  of  citizens  as  against 
another  class,  should  also  be  prohibited.  It  is  generally  held 
that  a  company  is  justified  in  charging,  and  a  city  is  justified 
in  permitting  it  to  charge,  a  different  rate  for  power  from 
that  charged  for  lighting.  There  is  also  a  general  disposition 
to  admit  of  lower  rates  for  large  consumers  than  for  small 
ones.  As  already  indicated  in  a  preceding  chapter,  the  objec¬ 
tion  to  different  rates  charged  to  users  of  different  classes,  that 
is  to  say,  to  those  who  use  electric  current  for  entirely  different 
purposes,  is  much  less  obvious  than  the  objection  to  dis¬ 
crimination  in  rates  on  account  of  differences  in  the  quantity 
of  current  used  for  the  same  purpose.  There  can  be  no 
serious  question  but  that  all  discriminations  of  this  latter  sort 
are  vicious  in  their  effect  and  should  be  prohibited.  When 
the  rates  paid  for  a  public  utility  cease  to  be  determined  by 
competition  and  come  to  depend  upon  regulation  by  public 
authority,  either  as  a  part  of  the  conditions  of  a  franchise  or 
by  separate  act  of  a  legislative  or  administrative  body,  the 
rates  so  fixed,  per  unit  of  use,  should  be  uniform  to  all 
individuals  without  reference  to  whether  the  amount  used  is 
large  or  small.  A  difference  in  the  rates  charged  for 
electrical  current  used  for  different  purposes,  such  as,  for 
example,  lighting  and  power,  does  not  necessarily  come  under 
this  prohibition,  for  the  reason  that  the  use  of  current  for 
the  one  purpose  does  not  compete  with  the  use  for  the  other 
purpose ;  at  least  it  does  not  compete  directly.  Furthermore, 
it  may  be  of  great  importance  to  the  public  welfare  of  a  city, 
for  example,  to  encourage  the  use  of  electricity  as  a  motive 
power  in  order  to  eliminate  the  smoke  nuisance,  while  it  may 


214 


MUNICIPAL  FRANCHISES. 


not  be  of  equal  importance  to  encourage  the  use  of  electricity 
as  against  other  means  of  illumination.  In  the  present  state 
of  public  enlightenment  and  in  the  confusion  of  interests  in 
relation  to  the  control  of  public  utilities,  the  adjustment 
of  rates  for  the  use  of  electric  current  is  a  complex  and 
difficult  problem.  But,  as  cities  come  more  and  more  to  take 
the  long  look  ahead,  instead  of  being  guided  by  mere  present 
expediency,  the  principle  of  uniformity  in  rates  will  be  more 
and  more  closely  adhered  to. 

Another  subject  of  the  utmost  importance  in  connection 
with  any  electrical  franchise,  is  the  requirement  of  publicity 
of  accounts.  This  publicity  should  be  complete,  that  is  to 
say,  the  companies  should  be  required  to  make  detailed  re¬ 
ports  according  to  forms  prescribed  by  public  authorities,  and 
the  proper  officers  or  representatives  of  the  city  should  have 
the  right  to  inspect  from  time  to  time  all  the  company’s  books 
and  vouchers  and  report  their  findings  in  such  detail  as  to 
throw  all  possible  light  upon  the  company’s  income  and  cost 
of  service.  Such  publicity  should  also  be  sufficient  to  pre¬ 
vent  the  misuse  of  the  company’s  funds  for  political  or  other 
improper  purposes  and  to  prevent  the  giving  of  secret  rebates 
and  other  favors. 

Another  matter  for  which  provision  should  be  made  in 
every  franchise,  is  that  of  extensions.  Every  company  should 
be  required,  of  course,  to  supply  any  responsible  individual 
or  corporation  desiring  service,  if  such  individual  or  corpora¬ 
tion  is  situated  within  reasonable  distance  from  the  com¬ 
pany’s  lines.  The  question  of  extending  its  lines  into  new 
territory  should  not,  however,  be  left  to  the  discretion  of  the 
company.  One  of  the  main  purposes  of  a  franchise  should  be 
to  secure  the  widest  possible  distribution  of  the  service. 
Accordingly,  if  underground  construction  is  required,  the 
company  may  reasonably  be  compelled  to  lay  its  conduits  in 
the  streets  in  advance  of  paving  or  at  times  when  the  streets 
are  being  repaved.  If  extensions,  however,  are  in  outlying 
districts  where  pole  lines  are  permitted,  a  provision  should  be 
made  by  which  the  company  would  be  required  to  extend  its 
lines  into  any  given  territory  upon  petition  or  other  evidence 
that  the  demand  for  electrical  current  along  the  desired  ex-< 
tension  will  be  sufficient  to  pay  operating  expenses.  In  the 
case  of  a  prosperous  company  doing  a  profitable  business  in  a 


ELECTRIC  LIGHT  FRANCHISES.  215 

densely  populated  city,  it  might  even  be  required  that  the 
company  should  extend  its  lines,  upon  request  of  the  city 
authorities  or  the  determination  of  a  judicial  tribunal,  into 
districts  where  the  service  will  for  a  limited  time  be  insufficient 
to  pay  the  cost  of  operation.  In  short,  the  provisions  for 
extensions  of  service  should  be  such  as  to  require  the  com¬ 
pany  to  push  its  lines  out  into  new  districts  as  rapidly  as 
possible  without  tending  to  cripple  its  service  to  the  bulk  of 
its  consumers. 

In  every  franchise  the  city  should  reserve  the  right  to  con¬ 
trol  absolutely  the  locations  of  the  company’s  pole  lines  or 
conduits  in  the  streets,  to  the  end  that,  whenever  public  con¬ 
venience  may  require,  these  lines  may  be  relocated,  overhead 
wires  may  be  placed  underground,  and  sufficient  space  may  be 
reserved  for  all  other  public  utilities,  both  present  and  to 
come.  This  matter  of  the  control  of  the  street  space  is  of 
primary  importance  to  the  city.  It  should  extend  beyond  the 
right  to  determine  the  original  locations,  so  that  the  city 
authorities  will  have  a  continuous  and  unalienated  right  to 
award  locations  in  all  public  places  as  public  convenience 
and  necessity  may  from  time  to  time  require. 

No  franchise  for  electric  lighting  or  any  other  utility 
should  be  granted  in  perpetuity.  There  are  many  objections 
also  to  franchises  granted  for  a  definite  period  of  years.  The 
best  kind  of  franchise  is  one  that  is  indeterminate  as  to  time, 
and  one  that  reserves  to  the  city  the  right  of  revocation  at 
any  time  upon  condition  that  the  city  purchase  the  plant  and 
property  of  the  company  at  a  reasonable  valuation,  not  includ¬ 
ing  any  franchise  value,  but  with  provision  for  a  bonus  over 
cost  in  cases  where  the  purchase  is  made  before  the  property 
has  been  fully  developed  as  a  pajdng  enterprise.  While  it  is 
well  that  the  right  to  purchase  at  any  time  should  be  reserved, 
there  are  no  very  serious  objections  to  the  form  of  franchise 
which  reserves  this  right  to  the  city  at  stated  intervals  of  not 


more  than  five  years. 

Inasmuch  as  electric  lighting  companies  have  in  many 
cases  come  into  possession  of  numerous  different  franchises 
containing  substantially  different  conditions,  so  that  it  is 


frequently  impossible  for  the  public  authorities  to  tell  under 
what  particular  franchise  or  franchises  the  company  is  operat¬ 
ing,  it  is  eminently  desirable  to  make  one  of  the  conditions 

, 


216 


MUNICIPAL  FRANCHISES. 


of  a  franchise  that  the  company  receiving  it  shall  surrender 
all  preceding  franchises  then  in  its  possession  or  thereafter 
secured  by  it. 

Finally,  it  is  desirable  that  a  franchise  should  limit  the 
possible  capitalization  of  the  grantee’s  property.  The  issue 
of  stock  or  bonds  on  the  basis  of  the  value  of  the  franchise 
itself,  except  to  the  amount,  if  any,  which  the  company  has 
paid  the  city  for  its  grant,  should  be  made  impossible.  Fur¬ 
thermore,  it  is  desirable  that  a  limit  should  be  set  upon  the 
amount  of  bonds  that  may  be  issued  against  physical  property. 
The  promoters  of  a  public  service  corporation,  if  they  are 
interested  in  establishing  and  operating  a  utility  in  good 
faith,  should  be  willing  to  furnish  a  considerable  proportion  of 
the  required  capital  out  of  their  own  pockets.  In  other 
words,  it  is  bad  public  policy  to  permit  a  company  to  con¬ 
struct  its  plant  and  equip  its  lines  entirely  from  the  proceeds 
of  the  sale  of  bonds.  If  the  enterprise  is  one  for  service 
rather  than  for  exploitation,  there  is  no  reason  why  the 
individuals  who  are  to  have  control  of  the  company’s  opera¬ 
tions,  should  not,  as  stockholders,  furnish  at  least  from  one- 
third  to  one-half  of  the  necessary  capital.  A  franchise 
should,  therefore,  provide  that  the  grantee  may  not  issue 
bonds  to  an  amount  in  excess  of,  say,  60  per  cent  of  the  fair 
value  of  its  physical  property. 


CHAPTER  VIII. 

THE  TELEPHONE. 


135.  History  and  growth  of  the  tele-  139.  Peculiarity  of  the  telephone  among 

phone  as  a  public  utility.  public  utilities. 

136.  Comparison  of  the  telephone  with  140.  Increase  of  cost  with  increase  of 

electric  light,  heat  and  power.  business. 

137.  Comparative  statistics  of  the  Bell  141.  Competition  versus  monopoly. 

and  Independent  systems.  142.  Measured  rates  versus  flat  rates. 

138.  The  American  Telephone  and  Tele-  143.  Discrimination  in  telephone  rates. 

graph  Company  and  its  subsid-  144.  Telephone  equipment. 

iaries. 

135,  History  and  growth  of  the  telephone  as  a  public 
utility.  — It  is  said  that  the  first  regularly  equipped  com¬ 
mercial  exchange  ever  established  for  public  or  general  service 
as  a  “  central  office  ”  was  the  exchange  opened  at  New 
Haven,  on  January  28,  1878.1  From  that  time  until 
1894,  when  the  original  patents  expired,  practically  the  entire 
telephone  business  of  the  country  was  controlled  by  the 
American  Bell  Telephone  Company.  During  those  years  the 
telephone  was  a  luxury.  With  the  advent  of  competition, 
however,  a  period  of  wonderful  expansion  in  the  telephone 
business  was  inaugurated.  In  1902  there  were  forty-four 
Bell  systems  and  4,107  Independent  systems  in  operation. 
The  Bell  Companies  however,  were  a  compact  and  powerful 
group  under  the  direct  control  of  the  American  Telephone 
and  Telegraph  Company,  successor  to  the  Bell  Telephone 
Company,  and  still  had  more  than  half  of  the  telephone 
business  of  the  country.  In  addition  to  the  4,151  com¬ 
mercial  and  mutual  telephone  systems  of  which  the  Census 
Bureau  got  reports  for  the  year  1902,  there  were  about  5000 
independent  farmer  or  rural  lines,  which,  according  to  the 
Census  Report,  were  generally  without  separate  exchanges  and 
were  usually  operated  on  a  grounded,  although  sometimes  on 
a  metallic  circuit,  “  wire  fences  being  used  in  some  cases.”  2 

1  Bulletin  17  on  “Telephones  and  Telegraphs,  1902”  issued  by  the  Bureau  of  the 
Census,  page  25. 

*  Ibid.,  p.  25. 


217 


218 


MUNICIPAL  FRANCHISES. 


Many  of  these  lines  were  connected  with  the  exchanges  of 
commercial  systems.  Five  years  later  in  1907  the  Census 
Bureau  found  a  total  of  5,269  commercial  and  mutual  systems 
and  17,702  independent  farmer  or  rural  lines.1  The  com¬ 
parison  of  the  telephone  statistics  of  1902  with  those  of  1907 
reveals  a  rapidity  of  telephone  development  that  is  almost 
startling.  The  total  length  of  wire  in  operation  increased 
from  a  little  less  than  five  million  to  practically  thirteen 
million  miles.  The  number  of  telephones  in  use  increased 
from  2,371,000  to  6,118,000.  The  estimated  number  of  tele¬ 
phone  messages  or  talks  in  the  course  of  the  year  increased 
from  a  little  over  five  billions  to  nearly  eleven  and  one-half 
billions.  The  gross  income  of  the  telephone  business  increased 
from  $86,825,000  to  $184,461,000;  while  the  outstanding 
capitalization  increased  from  $348,000,000  to  more  than 
$814,000,000  in  the-  five-year  period.  The  total  num¬ 
ber  of  employees  and  wage  earners  of  the  various  telephone 
companies  increased  from  78,752  to  144,169,  and  the  total 
amount  of  salaries  and  wages  paid  in  the  course  of  a  year 
increased  from  a  little  over  $36,000,000  to  more  than 
$68,000,000.  It  is  interesting  to  note  that  while  the  total 
amount  of  capital  stock  of  telephone  companies  outstanding 
increased  only  87.1%  in  this  five-year  period,  the  amount  of 
bonds  outstanding  increased  308.1%  and  the  amount  of 
capital  stock  authorized  increased  191.8%.  Indeed,  the  par 
value  of  the  authorized  capital  stock  of  the  companies  had 
reached  in  1907  the  gigantic  total  of  $1,122,000,000,  while 
the  par  value  of  the  authorized  bonds  of  the  companies 
amounted  to  almost  exactly  one-half  that  sum. 

The  telephone,  more  than  any  other  public  utility,  is  not 
confined  to  cities.  Of  the  3', 157  commercial  systems  in  oper¬ 
ation  in  1902,  only  530  were  in  places  having  a  population 
of  more  than  4,000  inhabitants,  as  against  2,627  in  small 
towns  and  rural  communities.  Furthermore,  these  figures 
take  no  account  of  the  mutual  systems  and  the  independent 
rural  lines,  which  are  practically  altogether  in  country  dis¬ 
tricts.  It  should  be  said,  however,  that  although  83.2%  of 
the  entire  number  of  commercial  systems  had  their  principal 
exchanges  in  places  of  less  than  4,000  population,  these  sys¬ 
tems  controlled  only  8.8%  of  the  wire  in  use  in  1902,  and 

1  Preliminary  Report  on  Telephones,  issued  Jan.  29,  1909. 


THE  TELEPHONE. 


219 


18.1%  of  the  number  of  telephones  in  use,  while  their  gross 
receipts  were  only  7.6%  of  the  total  gross  receipts  of  the  com¬ 
mercial  systems.  The  comparative  importance  of  the  tele¬ 
phone  as  a  public  utility  is  illustrated  by  the  fact  that  in  1902 
there  were  fifty-six  times  as  many  telephone  conversations  as 
there  were  telegraph  messages  sent,  and  about  10%  more 
telephone  messages  than  there  were  letters  carried  in  the 
United  States  mails.  In  1907  there  were  practically  a  hun¬ 
dred  times  as  many  telephone  connections  made  as  there  were 
telegraph  messages  sent. 

136.  Comparison  of  the  telephone  with  electric  light, 
heat  and  power. — The  story  of  the  two  great  public  utilities 
most  recently  established  is  a  thrilling  one.  The  telephone 
came  into  use  as  a  public  utility  two  or  three  years  prior  to 
the  first  establishment  of  central  electric  lighting  stations. 
The  two  utilities  have  developed  hand  in  hand.  In  1902  their 
gross  earnings  were  practically  the  same.  By  1907,  however, 
the  telephone  had  obtained  a  slight  lead  over  electric  light, 
heat  and  power,  the  gross  earnings  of  the  telephone  industry 
having  increased  112.5%  in  five  years  while  the  gross  earn¬ 
ings  of  the  central  electric  light  and  power  stations  had  in¬ 
creased  only  104.9%  in  the  same  period.  The  figures  for 
1907  were  $184,462,000  for  telephones  and  $175,642,000  for 
electric  light,  heat  and  power.  For  both  utilities,  electric 
wires  are  the  conductors,  but  in  one  the  electric  current  is 
used  for  the  transmission  of  “  intelligence  ”,  while  in  the  other 
the  current  itself  is  transmitted  as  a  commodity.  The  total 
capacity  of  the  dynamos  operated  by  the  telephone  companies 
in  1902  was  5459  horse-power,  while  the  capacity  of  the  dy¬ 
namos  of  the  central  electric  light  and  power  stations  was  ap¬ 
proximately  1,625,000  horse-power,  or  three  hundred  times  as 
great.  The  capitalization  of  the  two  utilities  in  1902  was 
widely  divergent;  as  against  $627,000,000  par  value  of  out¬ 
standing  stocks  and  bonds  of  electric  companies  there  was 
only  $348,000,000  of  telephone  stocks  and  bonds  outstanding. 
On  the  other  hand,  the  telephone,  furnishing  a  service  rather 
than  a  commodity,  employed  78,752  persons  as  against  27,- 
859  employed  by  the  electric  light  and  power  companies. 
The  outstanding  capitalization  of  the  electrical  companies  as 
given  in  the  preliminary  report  of  the  Census  Bureau,  giving 
a  summary  of  electrical  statistics  for  1907,  is  $1,342,000,000, 


220 


MUNICIPAL  FRANCHISES. 


showing  an  increase  of  114%  in  five  years,  while  the  corre¬ 
sponding  increase  in  the  case  of  telephone  companies  was 
134%.  In  1902  there  was  $4.01  of  telephone  capitalization 
to  every  $1  of  income  and  $7.32  of  electric  light  and  power 
capitalization  to  every  $1  of  income.  These  figures  had  in¬ 
creased  by  1907  to  $4.42  and  $7.65  respectively.  The 
difference  in  the  number  of  persons  employed  by  the 
two  utilities  continues  much  the  same  as  it  was  in  1902, 
there  being  a  total  of  144,169  telephone  employees  as 
against  only  47,632  employees  of  the  electrical  corporations. 
It  follows,  from  the  difference  between  these  two  utilities, 
that  the  points  of  greatest  interest  to  the  public  in  the  fran¬ 
chises  under  which  they  are  conducted  are  somewhat  different. 
While  in  the  case  of  electric  light  and  power  companies  special 
attention  must  be  paid  to  original  construction,  including 
appliances  for  protecting  life  and  property  from  dangerous 
currents,  in  the  case  of  telephone  companies,  the  authorities 
must  take  special  pains  to  secure  a  high  quality  of  personal 
service. 

137.  Comparative  statistics  of  the  Bell  and  Independent 
systems. — As  already  stated,  there  were  in  1902  only  forty- 
four  Bell  systems  as  against  4,107  Independent  systems,  not 
counting  farmer  lines.  The  Bell  companies,  however,  were 
in  most  cases  great  organizations,  one  company  operating 
frequently  in  several  states,  while  the  Independent  systems 
were  for  the  most  part  operated  by  a  different  company  for 
each  community.  At  that  time  the  Bell  companies  wrere 
operating  3,388,000  miles  of  wire,  while  the  Independent 
companies  operated  only  1,463,000  miles.  In  the  numbers 
of  subscribers  and  the  numbers  of  telephone  stations,  the 
two  groups  were,  however,  more  nearly  equal.  The  Bell 
companies  had  1,222,000  subscribers  and  1,317,000  stations, 
as  against  956,000  subscribers  and  998,000  stations  of  the 
Independent  companies.  The  total  number  of  Bell  telephones 
in  use  in  1907  was  3,132,000  as  against  2,986,000  Indepen¬ 
dent  telephones.  In  1902  the  Independent  companies  oper¬ 
ated  6,608  public  exchanges  and  7,076  switchboards  as  against 
3,753  exchanges  and  3,820  switchboards  operated  by  the  Bell 
companies.  The  messages  or  talks  over  the  two  systems  were 
approximately  in  the  ratio  of  two  over  the  Independent  lines 
to  three  over  the  Bell  lines.  Of  long  distance  messages  there 


THE  TELEPHONE. 


221 


were  only  44,000,000  Independent  as  against  76,000,000 
Bell.  The  difference  in  the  number  of  officers  and  employees 
was  very  great.  The  Bell  companies  had  nearly  three  times 
as  many  officers  and  clerks  and  paid  them  nearly  four  times 
as  much  money  as  the  Independents,  and  approximately  the 
same  ratio  held  good  with  reference  to  the  number  of  wage- 
earners  and  the  total  amount  of  wages  paid. 

In  1902,  the  outstanding  capital  stock  of  the  Bell  com¬ 
panies  was  $198,000,000,  while  that  of  the  Independent  com¬ 
panies  was  about  $76,000,000;  but  the  Bell  companies  paid 
$13,714,000  in  dividends  while  the  Independents  paid  only 
$1,268,000.  The  outstanding  bonded  indebtedness  of  the 
Bell  companies  was  about  $35,000,000,  while  that  of  the 
Independent  companies  was  $3*9,000,000.  As  already  stated, 
the  entire  outstanding  capitalization  of  all  telephone  com¬ 
panies  in  1907  was  over  $814,000,000.  The  exact  ratio  of 
division  between  the  Bell  and  Independent  companies  is  not 
given  in  the  preliminary  report  of  the  Census  Bureau,  but 
the  figures  given  in  Moody’s  Manual  for  1908  indicated  a 
total  net  capitalization  of  approximately  $570,000,000  for 
the  Bell  companies  at  that  time,  while  President  Lindemuth, 
of  the  International  Independent  Telephone  Association, 
stated  in  1908  that  the  Independent  systems  in  the  United 
States  and  Canada,  including  factories  and  supply  houses, 
represented  an  investment  of  over  $350,000,000.1  On  Jan¬ 
uary  1,  1909,  the  American  Telephone  and  Telegraph  Com¬ 
pany  claimed  3,215,000  stations  directly  operated  by  the  Bell 
companies  besides  1,149,000  other  stations  operated  by  com¬ 
panies  connected  with  the  Bell  systems  as  sub-licensees.  The 
Independents  claimed  in  1908  to  have  over  4,000,000  tele¬ 
phones  installed.  It  seems  therefore  that  the  two  groups  of 
companies  are  at  the  present  time  quite  evenly  balanced  as 
to  the  amount  of  service  rendered  and  as  to  their  comparative 
importance  as  parts  of  a  great  public  utility. 

138.  The  American  Telephone  and  Telegraph  Company 
and  its  subsidiaries. — The  American  Telephone  and  Telegraph 
Company  was  incorporated  in  New  York  in  1885,  and  from 
that  time  until  1900  operated  the  long  distance  lines  of  the 
American  Bell  Telephone  Company,  the  latter  being  the 
“  parent 99  company  of  the  Bell  systems.  On  March  27,  1900, 

*  “  A  Larger  View,”  by  A.  O.  Lindemuth,  published  by  International  Independ¬ 
ant  Telephone  Association,  p.  2. 


222 


MUNICIPAL  FRANCHISES. 


the  American  Telephone  and  Telegraph  Company,  having 
acquired  all  the  property  of  the  Bell  company,  took  the  place 
of  the  “  parent  ”  company  and  became  what  might  be  termed 
the  step-mother  of  the  entire  system  of  Bell  companies.  The 
list  of  affiliated  Bell  companies  given  in  the  Census  report 
for  1902  includes  the  American  Telephone  and  Telegraph 
Company  and  forty-three  licensee  companies,  with  a  gross 
capitalization  of  $372,000,000,  and  a  net  capitalization,  after 
excluding  duplications,  of  $233,000,000.  As  reported  in 
Moody’s  Manual  for  1908,  there  were  only  33  licensee  com¬ 
panies,  the  difference  in  the  two  lists  being  accounted  for 
principally  by  the  absorption  of  several  of  the  companies  that 
were  operating  in  1902.  The  gross  capitalization  of  the  Bell 
companies  had  increased  to  approximately  $800,000,000 ;  and 
the  net  capitalization,  to  about  $570,000,000.  Moody’s 
states  that  for  each  of  its  associated  companies,  the  American 
Telephone  and  Telegraph  Company  “  furnishes  all  needed 
telephones,  replaces  them  with  others  when  required,  grants 
the  right  to  use  all  patents  owned  or  controlled  by  it,  and  per¬ 
forms  engineering  and  other  services.  The  associated  com¬ 
panies  pay  therefor  four  and  one-half  per  cent  of  their  gross 
telephone  receipts  In  addition  to  the  licensee  companies, 
the  American  Telephone  and  Telegraph  Company  has  a 
controlling  interest  in  the  Western  Electric  Company,  wffiich, 
as  a  manufacturing  concern,  makes  and  sells  “  the  various 
electrical  instruments  used  under  the  Bell  telephone  patents, 
as  well  as  other  kinds  of  electrical  apparatus  and  appliances 
The  relations  existing  between  the  licensee  companies  on 
the  one  hand,  and  the  American  Telephone  and  Telegraph 
Company  and  the  Western  Electric  Company  on  the  other 
hand,  may  be  illustrated  by  the  case  of  the  Chicago  Telephone 
Company,  as  reported  April  3,  1907,  by  the  Special  Telephone 
Commission  appointed  by  the  Chicago  City  Council.  It  ap¬ 
pears  from  this  report  that  the  Chicago  Telephone  Company 
many  years  ago  entered  into  a  contract  with  the  American 
Bell  Telephone  Company,  the  original  parent  of  the  Bell 
system,  by  which  the  Chicago  company  received  an  exclusive 
license  “  to  operate  within  its  territory  under  the  fundamental 
Bell  and  other  telephone  patents.”  The  Commission  says 
that  originally  the  contract  included  “  royalty  charges  at  a 
figure  that  would  be  extremely  high  to-day,  but  these  have 


THE  TELEPHONE. 


223 


been  gradually  reduced.  The  earlier  patents  have  been  expir¬ 
ing  from  time  to  time,  and  the  contract  has  been  correspond¬ 
ingly  modified.  The  American  Bell  Telephone  Company  con¬ 
tinues  to  furnish  and  maintain  the  telephone  transmitters 
(with  accompanying  induction  coils)  and  receivers  used  by 
the  Chicago  Telephone  Company,  and  to  perform  other  ser¬ 
vices  besides  licensing  the  latter  company  to  operate  under 
existing  patents,  and  the  payment  for  these  services  and  the 
license  is  being  made  by  the  Chicago  Telephone  Company 
at  the  rate  of  four  and  one-half  per  cent  of  its  gross  re¬ 
ceipts  ”.1  The  amount  of  this  payment  for  1906  aggregated 
about  $351,000,  of  which  the  Commission  estimated  that 
$282,000  was  paid  on  account  of  business  within  the  city  of 
Chicago.  In  discussing  this  contract,  the  Commission  estim¬ 
ated  that  over  150,000  telephone  sets,  “  each  comprising  a 
transmitter,  receiver  and  induction  coil  ”,  were  being  fur¬ 
nished  and  partially  maintained  by  the  parent  company. 
The  value  of  these  sets  was  said  to  be  about  $3.00  each;  and 
twenty-four  per  cent  of  the  original  cost  of  the  instruments 
was  reckoned  as  a  fair  annual  charge  for  maintenance,  in¬ 
terest  on  investment,  depreciation,  etc.  The  Commission 
figured  that  after  making  this  allowance,  the  Chicago  Tele¬ 
phone  Company  was  still  paying  $174,000  as  a  licensee  for 
its  Chicago  business.  The  various  ways  in  which  this  relation¬ 
ship  to  the  Bell  system  of  companies  was  of  value  to  the 
Chicago  company,  as  claimed  by  it,  were  explained  by  the 
Commission  as  follows : 2 

“  The  company’s  engineers  report  that  they  receive  working  specifi¬ 
cations  for  switchboard  installations,  line  and  conduit  work,  pole  line 
construction,  cable  construction,  building  materials,  etc.,  etc.,  of  which 
several  hundred  specifications  are  now  on  file,  and  others  are  being 
furnished  from  time  to  time;  and  bulletins  are  supplied,  treating  of 
engineering  practice  and  operating  methods,  which  summarize  the 
experience  and  practice  of  the  various  large  Bell  Telephone  Companies. 
Special  studies  of  the  best  methods  of  operating  are  carried  on  when¬ 
ever  the  occasion  arises,  by  the  engineers  of  the  American  Bell  Tele¬ 
phone  Company,  and  that  company  maintains  a  well  equipped 
laboratory  in  Boston,  wherein  tests  and  investigations  are  carried  on 
for  the  benefit  of  the  local  companies.” 

It  was  also  pointed  out  that  the  Chicago  company,  as  licen¬ 
see,  enjoyed  the  exclusive  use  within  its  territory  of  apparatus 
still  covered  by  the  patents  of  the  parent  company. 

1  Report  of  the  Committee  on  Gas,  Oil  and  Electric  Light,  Sept.  8,  1907  on  “  Tel¬ 
ephone  Service  and  Rates,”  p.  88. 

J  Ibid.,  p.  89. 


224 


MUNICIPAL  FRANCHISES. 


The  Commission  explained  that  the  Chicago  Telephone 
Company  also  had  a  contract  with  the  Western  Electric  Com¬ 
pany,  by  which  the  latter  became  the  purchasing  agent  for  the 
former,  under  conditions  which  seemed  to  the  Commission  to 
be  advantageous  to  the  Chicago  company. 

“  The  Western  Electric  Company  is  a  large  manufacturer  of  electri¬ 
cal  apparatus”,  said  the  Commission,1  “and  therefore  a  large  user  for 
itself  of  copper  wire  and  of  other  materials  needed  by  the  Chicago 
Telephone  Company,  which  makes  it  a  purchaser  that  is  able  to  gain 
the  best  market  prices  for  large  purchases. 

“  The  Western  Electric  Company  is  also  the  purchasing  agent  of 
other  Bell  telephone  operating  companies,  which  further  improves  its 
opportunity  for  purchasing  at  low  figures.  The  contract  between  the 
Chicago  Telephone  Company  and  the  Western  Electric  Company  may 
be  terminated  by  either  party  upon  three  months’  notice  given  in 
writing.  The  Telephone  Company  is  privileged  to  purchase  of  other 
parties  any  materials  that  can  be  purchased  for  less  money  direct  than 
through  the  Western  Electric  Company.  The  Western  Electric  Com¬ 
pany  is  under  obligation  to  sell  any  of  its  manufactured  products  to 
the  Telephone  Company  for  not  exceeding  the  price  at  which  similar 
products  could  be  bought  elsewhere,  and  at  a  price  not  exceeding  that  at 
which  it  sells  to  any  other  purchaser.  The  Western  Electric  Company 
receives  2  per  cent  commission  for  handling  the  general  supplies 
furnished  to  the  Telephone  Company,  which  the  Western  Electric 
Company  does  not  manufacture ;  but  this  commission  is  only  paid  to  it 
on  condition  that  the  total  price  to  the  Chicago  Telephone  Company, 
with  the  2  per  cent  commission  added,  shall  not  exceed  the  price  the 
Telephone  Company  would  pay  if  it  purchased  its  supplies  at  the  most 
favorable  figures  in  the  open  market.  The  Telephone  Company  has 
the  privilege  of  buying  a  special  list  of  apparatus  and  supplies  any¬ 
where  at  its  pleasure,  and  this  list  of  apparatus  and  supplies  may  be 
changed  by  adding  thereto  or  deducting  therefrom,  at  the  pleasure  of 
the  Telephone  Company.” 

In  passing  judgment  on  the  merits  of  this  contract,  the 
Commission  stated  that  it  appeared  to  be  favorable  to  the 
Telephone  Company.  In  regard  to  the  two  contracts  ju3t 
described,  the  Commission  gave  as  its  opinion,  that  they  “  are 
not  harmful,  but  enable  the  Chicago  Telephone  Company  to 
improve  its  service  and  purchase  its  supplies  at  a  less  expense 
than  it  otherwise  could  ”. 

The  comparatively  small  number  of  companies  which  con¬ 
stitute  the  Bell  system  and  operate  in  every  state  and  territory 
of  the  United  States,  have  a  complete  or  practically  complete 
monopoly  of  telephone  service  in  Greater  New  York,  Chicago, 
Boston,  San  Francisco,  Washington,  Cincinnati,  Milwaukee 
and  a  number  of  other  important  cities. 

1  Report  of  Committee,  op.  cit.,  p.  90. 


THE  TELEPHONE. 


225 


The  justification  of  the  gigantic  Bell  system,  as  stated  in 
the  annual  report  of  the  directors  of  the  American  Telephone 
and  Telegraph  Company  to  the  stockholders  for  the  year 
ending  Dec.  31,  1908,  is  of  surpassing  interest. 

“The  relations  of  the  American  Telephone  and  Telegraph  Company 
and  the  associated  companies  are  not  generally  understood  ”,  says  this 
report.1  “The  American  Telephone  and  Telegraph  Company  is  pri¬ 
marily  a  holding  company,  holding  stocks  of  the  associated  operating 
and  manufacturing  companies.  As  an  operating  company  it  owns  and 
operates  the  long-distance  lines,  the  lines  that  connect  all  the  systems  of 
the  associated  operating  companies  with  each  other. 

“In  addition  to  these  two  functions  it  assumes  what  might  he  termed 
the  centralized  general  administrative  functions  of  all  the  associated 
companies. 

“  The  Bell  system  is  one  system  telephonically  inter-connected,  inter¬ 
communicating  and  inter-dependent.  This  is  such  a  system  that  any 
one  of  over  4,000,000  subscribers  can  talk  with  any  other  one  within 
carrying  power  of  the  voice  over  wires,  the  only  exception  being  that 
the  Pacific  Coast  and  the  Middle  Rocky  Mountain  region  are  not  yet  con¬ 
nected.  ****** 

“  The  American  Telephone  and  Telegraph  Company  owns  and  main¬ 
tains  all  telephones.  It  also  owns  either  directly  or  through  the 
Western  Electric  Company  all  patents. 

“  It  has  a  department  which  was  organized  at  the  very  beginning  of 
the  business  and  has  continued  since,  where  is  to  be  found  practically 
everything  known  about  inventions  pertaining  to  the  telephone  or 
kindred  subjects.  Every  new  idea  is  there  examined,  and  its  value 
determined  so  far  as  the  patent  features  are  concerned. 

“  The  Engineering  Department  takes  all  new  ideas,  suggestions  and 
inventions,  and  studies,  develops  and  passes  upon  them. 

“  It  has  under  continuous  observation  and  study  all  traffic  methods 
and  troubles,  improving  or  remedying  them. 

“It  studies  all  construction,  present  and  future  development  or  ex¬ 
tension  schemes,  makes  plans  and  specifications  for  the  same,  and  gives 
when  desired  general  supervision  and  advice.  It  has  a  corps  of  experts 
which,  in  addition  to  the  above  work,  is  at  all  times  at  the  service  of 
any  or  all  of  the  separate  companies.  ****** 

“  A  large  staff  has  been  and  is  continuously  engaged  in  the  considera¬ 
tion  of  disturbances  arising  from  transmission  and  other  lines  carrying 
heavy  currents,  and  in  many  cases  that  any  telephone  system  can  even 
exist  in  the  vicinity  of  such  lines  is  due  to  the  constant  and  continued 
attention  given  this  subject. 

“Every  new  trouble,  and  there  are  many,  comes  before  this  depart¬ 
ment.  When  settled  there,  it  is  settled  for  all.  This  has  established  a 
commercial,  operating  and  plant  practice  not  onl}r  for  our  own  associ¬ 
ated  companies,  but  for  others  of  high  standing  throughout  the  world. 

“  All  devices  or  inventions  submitted  receive  the  most  thorough  and 
painstaking  investigation,  and  it  is  safe  to  say  that  there  has  as  yet  been 
no  instance  where  any  invention,  system  or  method,  rejected  by  the 
Patent  and  Engineering  Departments  of  the  American  Telephone  and 
Telegraph  Company  has  ever  had  any  permanent  success  when  used 
elsewhere. 


*  Page  15. 


226 


MUNICIPAL  FRANCHISES. 


“  The  Manufacturing  Department  creates  and  builds  the  equipment 
and  apparatus  which  have  been  adopted.  In  this  way  throughout  the 
whole  grand  system  will  be  found  standardization  and  uniformity. 
This  is  not  any  handicap  on  improvement  or  development  of  the  art, 
for,  on  the  contrary,  every  suggestion  or  idea,  and  there  are  many,  has 
abundant  opportunity  to  be  tested,  which  would  not  be  possible  other¬ 
wise.  No  one  of  the  companies  could  by  itself  maintain  such  an  organ¬ 
ization,  and  it  would  be  fatal  to  any  service  to  introduce  or  try  out 
undeveloped  ideas  in  actual  service. 

“In  the  Legal  Department  all  the  big  and  general  questions  are 
looked  after.  It  forms  a  clearing  house  in  all  legal  matters  for  all  the 
legal  departments  of  the  separate  companies  to  which  assistance  and 
advice  are  given  on  all  questions  of  general  scope. 

“In  the  administration  all  questions  which  affect  all  companies,  all 
questions  between  the  associated  companies,  and  the  general  policy 
and  the  general  conduct  of  the  business,  are  considered  and  close  touch 
and  relationship  maintained  with  all  parts  of  the  system.  Experts  on 
every  subject  connected  with  this  business  are  continually  at  work  on 
old  or  new  subjects  and  ready  at  call  to  go  to  the  assistance  of  any  of 
the  companies.  In  short,  the  great  work  and  substantially  all  the 
expense  of  the  American  Telephone  and  Telegraph  Company  are 
involved  in  this  Centralized  General  Administration,  taking  care  of  all 
those  matters  which  are  common  to  all  companies,  or  which  if  taken 
care  of  by  each  company  would  mean  multiplication  of  work,  effort, 
expense  without  corresponding  advantage  or  efficiency.” 

Further  on  in  this  same  report  the  directors  call  attention 
to  the  “  stability  ”  of  the  business,  which  they  say  shows  an 
increase,  whatever  the  general  commercial  conditions  may  be. 

“This  stability  and  the  position  that  the  Bell  system  holds  ”,  con¬ 
tinues  this  report,1  “is  due  very  largely  to  the  policy  and  conditions 
under  which  it  was  developed,  not  alone  to  the  telephone. 

“  A  telephone — without  a  connection  at  the  other  end  of  the  line — is 
not  even  a  toy  or  a  scientific  instrument.  It  is  one  of  the  most  useless 
things  in  the  world.  Its  value  depends  on  the  connection  with  the 
other  telephone — and  increases  with  the  number  of  connections. 

“The  Bell  system  under  an  intelligent  control  and  broad  policy  has 
developed  until  it  has  assimilated  itself  into  and  in  fact  become  the 
nervous  system  of  the  business  and  social  organization  of  the  country. 

“  This  is  the  result  of  the  centralized  general  control  exercised  by 
the  company,  the  combination  of  all  local  systems  into  one  combined 
system  developed  as  a  whole.” 

139.  Peculiarity  of  the  telephone  among  public  util¬ 
ities — As  already  pointed  out,  from  the  standpoint  of  the 
consumer  the  telephone  is  the  most  monopolistic  of  all  public 
utilities.  In  spite  of  this  fact  there  are  certain  features  of 
the  business,  viewed  from  the  purely  commercial  standpoint, 
that  tend  to  invite  competition.  The  comparatively  small 
amount  of  capital  required,  the  relatively  small  percentage  of 

1  Report,  op.  cit p.  21 


THE  TELEPHONE. 


227 


waste  in  the  duplication  of  plants,  and  the  increase  of  cost 
per  unit  of  service  as  the  business  expands,  are  to  be  especially 
noted  in  this  connection.  The  question  of  competition  versus 
monopoly,  with  relation  to  this  particular  utility,  will  be  dis¬ 
cussed  more  at  length  in  succeeding  sections. 

Another  distinctive  feature  of  the  telephone  is  that  the 
utility  supplied  to  the  consumer  is  not  a  commodity,  like  gas, 
water  or  electric  current,  but  a  service.  While,  to  be  sure, 
transportation  on  the  street  cars  is  also  a  service,  it  is  visible 
and  tangible  as  compared  with  the  service  rendered  by  the 
telephone  company.  A  telephone  patron  is  utterly  helpless 
when  the  operator  answers  “  busy  ”,  or  when  the  line  is  out 
of  order  so  that  he  cannot  hear  the  voice  at  the  other  end. 
'The  fact  that  the  patron  is  talking  into  a  dumb  instrument 
and  that  he  cannot  see  what  is  the  matter  or  “  get  at  ”  the 
difficulty  or  the  person  responsible  for  it,  makes  him  curse 
the  company  and  feel  like  smashing  the  instrument. 

Partly  as  a  consequence  of  the  fact  that  this  utility  is  a 
service  rather  than  a  commodity,  there  has  not  been  invented 
as  yet  any  mechanical  device  by  which  the  amount  of  service 
used  can  be  accurately  measured  without  the  intervention  of 
the  human  element  and  the  consequent  danger  of  carelessness 
or  fraud.  A  gas  meter,  a  water  meter  or  an  electric  meter,  is 
a  mystery  to  the  average  consumer,  but  at  the  same  time  he 
has  the  opportunity,  by  cooperation  with  his  fellow  citizens, 
to  establish  a  system  of  public  inspection  and  sealing  by  which 
he  may  be  reasonably  protected  from  overcharging  as  to  the 
amount  of  the  commodity  used.  Telephone  experts  are 
working  on  the  problem  of  inventing  a  satisfactory  telephone 
meter.  It  is  difficult  to  see,  however,  how  any  purely  mechan¬ 
ical  device  will  be  able  to  separate  unavailing  calls  from  suc¬ 
cessful  ones  and  at  the  same  time  record  the  length  of  con¬ 
versations.  If  the  consumer  is  to  pay  for  his  telephone  service 
by  meter,  a  ten-minute  conversation  certainly  should  count  for 
more  than  a  half-minute  conversation,  and  it  might  not  be 
amiss  to  give  him  a  rebate  for  the  time  wasted  in  unsuccessful 
attempts  to  establish  connections  when  his  failure  is  due  to 
the  inefficiency  of  the  telephone  service. 

In  discussing  meters,  the  Chicago  Special  Telephone  Com¬ 
mission  said  i1 

x  Report  of  Committee,  op.  cit.,  p.  81. 


228 


MUNICIPAL  FRANCHISES. 


“  The  meter  question  is  one  which  creates  some  difficulty  in  the 
telephone  field.  Nickel  prepayment  telephone  boxes  provide  for  a 
large  number  of  users.  There  are  now  in  use  in  Chicago  over  68,000 
nickel  prepayment  telephones,  and  the  number  is  apparently  steadily 
increasing.  In  New  York  City  the  measured  rate  lines  are  individually 
equipped  with  meters  in  the  exchange  offices,  and  the  Chicago  Tele¬ 
phone  Company  has  developed  a  meter  which  makes  it  impossible  to 
register  more  than  a  single  unit  for  each  message  over  the  line.  We 
believe  that  this  meter  used  in  connection  with  the  measured  service 
lines  that  are  not  equipped  with  prepayment  boxes  will  prove  accurate 
and  satisfactory,  in  case  the  City  Council  grants  the  Chicago  Tele¬ 
phone  Company  a  franchise.  This  meter  is  arranged  in  such  a  manner 
that  no  record  can  be  made  until  the  connection  with  the  subscriber’s 
line  has  been  set  up  in  the  manner  required  for  making  a  communica¬ 
tion.  Thereupon  the  operator  by  pushing  a  button  may  cause  the 
meter  to  register  one  unit,  and  however  many  times  the  button  may  be 
pushed  thereafter,  through  oversight  or  malice  of  the  operator,  no  ad¬ 
ditional  messages  will  register  on  the  meter  until  the  connection  has 
been  taken  down  after  the  completion  of  the  message  and  a  new  con¬ 
nection  has  been  made,  as  upon  receiving  another  call  from  the  sub¬ 
scriber.  This  guards  against  an  excess  number  of  calls  being  registered 
against  any  subscriber  through  oversight  on  the  part  of  the  operator. 
We  see  no  reason  why  this  meter  arrangement  should  not  prove  com¬ 
mercially  accurate  and  satisfactory,  and  we  recommend  its  adoption 
for  the  instances  of  metered  lines  in  case  the  Chicago  Telephone  Com¬ 
pany  should  be  granted  a  franchise.” 

The  experience  of  New  Orleans  is  set  forth  by  Mr.  Henry 
Noble  Hall  in  his  special  report  to  the  Telephone  Committee 
of  the  New  Orleans  Board  of  Trade,  under  date  of  January 
14,  1908.  Mr.  Hall  says: 1 

“  It  is  necessary  to  point  out  here  that  the  principal  objection  to 
measured  rates  lies  in  the  difficulty  of  insuring  an  accurate  account  of 
the  messages  sent.  At  present  in  New  Orleans  records  are  kept  with 
pad  and  pencil  by  the  operators,  and  occasions  for  error  are  numerous, 
although  it  must  be  admitted  that  the  girls  are  more  likely  to  forget  to 
mark  calls  than  to  over-charge.  This  is  the  most  primitive  method  of 
recording  calls.  It  compels  each  operator  to  perform  a  certain  amount 
of  work  in  addition  to  the  necessary  switch-board  manipulations,  and 
this  extra  work — the  taking  in  hand  of  a  pencil  and  marking  of  the  call 
and  laying  down  the  pencil  again — necessarily  interferes  with  the 
operating  more  than  would  the  registering  by  means  of  a  mechanical  or 
push  button  device.  Pad  and  pencil  recording  means  more  operators ; 
this,  in  turn,  makes  a  larger  switch-board  equipment  necessary ;  all  of 
which  tends  to  increase  the  cost  of  operating.” 

In  New  York  a  registering  device  has  been  adopted  which 
is  claimed  to  be  fairly  satisfactory.  The  message  is  recorded 
when  the  operator  presses  a  button ;  but  unless  the  subscrib¬ 
er’s  connection  has  been  made,  the  machine  will  not  register. 

1  “  Telephone  Conditions  in  New  Orleans,  La.”,  1908,  published  by  New  Orleans 
Board  of  Trade  Ltd.,  p.  46. 


THE  TELEPHONE. 


229 


“By  this  means”,  say  Westingliouse,  Church,  Kerr&Co.,1  “  the  regis¬ 
ter  of  each  line  is  placed  under  the  control  of  the  operator  during  the  time 
that  the  particular  line  is  engaged  in  conversation,  and  not  otherwise, 
and  as  the  operator  is  informed  by  the  signal  lamp  when  the  called  sub¬ 
scriber  lifts  the  receiver  and  begins  to  talk  and  when  he  replaces  it  at 
the  end  of  the  conversation  she  knows  that  the  call  has  been  successfully 
completed,  then  by  pressing  the  button  she  can  register  the  call,  and 
hence  the  subscriber  is  only  charged  for  those  conversations  which  are 
successful.  As  the  registers  are  constructed  with  great  care,  are  sealed 
in  a  double  enclosure,  and  are  only  connected  with  the  subscriber’s 
line  during  the  actual  period  of  conversation  and  the  push  button  so 
arranged  as  to  make  accidental  registration  very  difficult,  if  not  im¬ 
possible,  the  chances  of  error  seem  to  be  reduced  to  a  minimum.” 

There  are  still  possibilities  of  error,  however.  The  operator 
may  forget  to  record  the  connection,  in  which  case  the  ad¬ 
vantage  would  be  with  the  subscriber.  Moreover,  the  operator 
could,  if  guided  by  malice,  double  the  record.  There  is  a 
series  of  signals,  however,  by  which  each  corps  of  nine  oper¬ 
ators  is  closely  watched  by  a  supervisor,  which  gives  a  double 
check  on  the  registration  of  each  call.  There  is  also  a  possi¬ 
bility  of  registering  a  count  for  both  parties  having  telephone 
connection  with  each  other,  in  case  the  local  wires  get  crossed. 
It  is  stated  that  whenever  the  New  York  Telephone  Company 
has  any  reason  to  suspect  the  accuracy  of  any  register,  the 
matter  is  taken  up  with  the  subscriber  and  adjusted  usually 
on  the  basis  of  the  average  number  of  monthly  calls  according 
to  previous  records.  The  auditor  of  the  company  was  author¬ 
ity  for  the  statement  in  1905,  that  during  the  preceding  six 
months  the  number  of  questionable  cases  of  counter  registra¬ 
tion  amounted  to  only  one  in  a  thousand  of  the  number  of 
counters  in  service.  The  authorities  from  whom  I  have  just 
quoted  make  this  comment,  namely,  that  “  the  registration  of 
telephone  calls  is  accomplished  with  an  accuracy  which  com¬ 
pares  favorably  with  other  commonly  accepted  commercial 
methods  for  measuring  the  service  which  a  vendor  sells  to  a 
customer  '\2 

The  telephone  differs  from  most  other  utilities  in  that  it 
is  not  a  purely  local  service.  While  it  makes  no  difference 
to  the  consumer  of  water,  gas,  steam  heat,  or  electric  current, 
whether  his  neighbor  is  supplied  from  the  same  mains  or 
not,  or  whether  the  city  in  which  he  lives  is  served  as  a  whole 
or  is  divided  into  a  dozen  separate  districts,  the  all-important 

1  “  Inquiry  into  Telephone  Service  and  Rates  in  New  York  City,”  June,  1905, 
p.  56. 

2  Ibid.,  p.  57. 


230 


MUNICIPAL  FRANCHISES. 


thing  in  telephone  service,  on  the  other  hand,  is  not  only  that 
every  one  who  uses  telephone  service  in  any  given  community 
should  be  connected  with  the  same  system,  but  that  this 
system  should  have  long  distance  connection  with  every 
other  community  in  the  state  or  country.  The  necessity 
for  connection  with  long  distance  lines  is  one  of  the  most 
important  factors  of  strength  in  the  Bell  monopoly,  and  is 
constantly  working  to  compel  the  consolidation,  or  at  least 
the  close  affiliation,  of  the  Independent  companies  throughout 
the  country.  This  fact  also  lessens  the  efficiency  of  local 
control  over  the  telephone  business  and  makes  more  essential 
some  kind  of  supervision  by  state  or  national  authorities. 
In  this  respect  the  telephone  is  similar  to  the  passenger 
transportation  business,  except  that  in  the  case  of  transporta¬ 
tion  local  and  long  distance  traffic  are  for  the  most  part 
taken  care  of  by  two  distinct  classes  of  companies,  namely, 
railroad  corporations  and  street  railway  corporations.  For 
this  reason  and  also  for  the  reason  that  the  patron  himself 
can  attend  to  the  transfers  from  local  to  long  distance  lines 
when  it  is  a  question  of  travel,  while  in  the  case  of  the  tele¬ 
phone  he  needs  immediate  connection,  for  which  he  must 
depend  altogether  on  invisible  and  distant  agents,  the  local 
authorities  are  even  more  dependent  upon  the  cooperation  of 
state  authorities  for  the  control  of  the  telephone  business 
than  for  the  supervision  of  transportation.  The  comparative 
importance  of  the  local  and  long-distance  service  is  only 
roughly  measured  by  the  fact  that  in  1907  there  were  forty- 
four  times  as  many  local  as  there  were  toll  connections,  for 
on  the  average  the  latter  brought  in  a  much  larger  revenue 
to  the  companies  and  were  correspondingly  more  important 
to  the  telephone  users. 

Still  another  peculiarity  of  the  telephone  utility  lies  in  the 
fact  that  a  citizen  may  secure  a  certain  amount  of  service 
without  having  a  private  telephone.  The  maintenance  of 
public  pay  stations  by  the  telephone  company  enables  the 
person  who  cannot  afford  a  telephone  in  his  own  house,  to 
make  use  of  the  system  in  emergencies  on  the  payment  of  a 
small  fee.  The  thing  most  analogous  to  the  public  pay 
station  in  other  utilities,  is  the  town  pump,  to  which  the 
thirsty  citizen  may  repair  for  a  drink  or  a  bucket  of  water. 
This  means  that  private  telephones  are  absolutely  essential 


THE  TELEPHONE. 


231 


only  to  business  and  professional  men  and  institutions, 
whose  interests  require  that  they  he  easily  accessible  to  their 
patrons  and  the  public  at  large,  while  the  use  of  the  telephone 
may  be  diffused  through  the  entire  population  of  the  com¬ 
munity  for  limited  and  necessary  service  at  an  insignificant 
expense  to  the  individual.  Furthermore,  while  the  wide¬ 
spread  practice  of  using  one’s  neighbor’s  telephone  is  no 
doubt  mildly  reprehensible,  it  is  in  a  multitude  of  cases  en¬ 
tirely  feasible  from  the  public  standpoint,  and  is  almost 
peculiar  to  the  telephone. 

Another  way  in  which  the  telephone  system  adjusts  itself 
to  the  consumer,  is  by  means  of  party  lines,  private  exchanges 
and  neighborhood  exchanges.  By  the  use  of  party  lines,  the 
cost  of  residence  telephones  is  greatly  reduced,  so  that  two, 
three  or  four  families — even  as  many  as  ten — receive  a  little 
of  the  benefit  of  this  utility  without  the  necessary  cost  in¬ 
volved  in  the  construction  of  private  lines  for  each  family.  At 
the  other  extreme  is  the  great  business  establishment  with 
scores  or  hundreds  of  employees  and  many  departments,  to 
which  the  telephone  would  be  simply- a  nuisance  if  it  meant 
that  all  calls  must  be  given  and  received  through  a  single  set 
of  instruments.  By  means  of  the  private  exchange  the  em¬ 
ployees  in  every  department  of  the  business  can  be  connected 
with  the  outside  world  with  much  greater  convenience  and 
at  much  less  expense  than  would  be  possible  if  separate  tele¬ 
phones  were  to  be  installed  for  all  the  departments  or  employ¬ 
ees.  The  neighborhood  exchange  is  useful  in  the  case  of 
suburban  communities,  where  it  is  important  for  the  residents 
to  have  means  of  communication  with  each  other  without  go¬ 
ing  to  the  expense  of  having  free  and  complete  communication 
with  the  central  exchanges  which  supply  the  needs  of  the  great 
city.  Patrons  of  the  telephone  who  are  connected  with  a 
neighborhood  exchange,  may  have  general  service  over  the 
entire  community  upon  necessary  occasions  by  the  payment 
of  a  small  fee. 

One  of  the  distinctive  features  of  telephone  service  is  the 
printing  and  distribution  of  a  telephone  directory  to  all  sub¬ 
scribers.  This  is  one  of  the  most  important  items  of  the  serv¬ 
ice.  Unless  the  directory  is  arranged  conveniently,  printed 
accurately  and  revised  frequently,  good  service  is  impossible. 
There  are  several  points  about  the  directory,  over  which  a 


232 


MUNICIPAL  FRANCHISES. 


company  and  its  patrons  may  quarrel.  One  is  the  question  of 
the  number  of  insertions  permitted  to  each  subscriber.  It 
is  often  convenient  that  different  members  of  a  family,  and 
especially  that  different  members  of  a  professional  or  business 
firm,  should  have  their  individual  names  in  the  telephone 
book,  although  they  use  only  one  telephone.  Another  point 
of  difficulty  is  in  regard  to  the  publication  of  a  double  list, 
one  alphabetically  under  the  names  of  subscribers,  and  the 
other  serially  under  the  numbers  of  the  telephones.  While 
the  second  list  is  of  much  less  importance  than  the  first,  it 
is  often  convenient,  when  a  telephone  number  has  been  left, 
for  a  subscriber  to  be  able  to  identify  the  party  at  the  other 
end  of  the  line  before  opening  communication.  In  connec¬ 
tion  with  a  rapidly  growing  exchange  it  is,  of  course,  neces-  . 
sary  that  the  telephone  directory  should  be  frequently  revised 
if  the  service  is  not  to  become  chaotic.  Even  with  a  com¬ 
paratively  stationary  system,  the  changes  on  account  of  death, 
removal  and  other  constantly  recurring  causes,  are  sufficient 
to  require  the  revision  of  the  directory  at  least  twice  a  year. 
This  constitutes  an  important  item  in  the  cost  as  well  as  in 
the  quality  of  service. 

140.  Increase  of  cost  with  increase  of  business. — The 

Committee  on  Gas,  Oil  and  Electric  Light,  in  its  special 
report  to  the  Chicago  City  Council  on  “  Telephone  Service 
and  Rates  ”,  September  3,  1907,  discussed  in  considerable 
detail  the  causes  that  go  to  make  the  telephone  industry  pe¬ 
culiar,  not  only  among  public  utilities  but  among  practic¬ 
ally  all  lines  of  business.  It  is  claimed  that  the  more  patrons  a 
telephone  company  has  at  a  given  rate,  above  a  certain  min¬ 
imum  number,  the  less  profit  there  is  from  each  one.  In  other 
words,  instead  of  being  able  to  supply  a  larger  and  larger 
number  of  patrons  at  a  reduced  cost  for  each,  the  company 
finds  that  the  expense  per  unit  of  telephone  service  increases 
with  the  expansion  of  its  business,  and,  consequently,  that 
the  more  business  it  has  the  higher  its  rates  must  be.  I  can¬ 
not  do  better  than  quote  at  length  the  following  discussion 
of  this  point  by  the  Chicago  Committee : 1 

“  The  average  person  does  not  understand  why  it  costs  more  per 
telephone  to  supply  telephone  service  in  a  large  city  than  in  a  small 
city.  The  assertion  of  this  principle  to  many  seems  a  paradox.  It  is 
regarded  as  contrary  to  the  ordinary  principle  of  business — that  is,  that 

1  Report,  op.  cit p.  12. 


THE  TELEPHONE. 


233 


the  unit  cost  becomes  less  as  the  volume  of  business  done  increases.  It 
is  but  natural  to  think  that  the  wholesale  principle  ought  to  apply  in 
the  telephone  business  as  in  other  lines.  This  idea  prevails  because  the 
ordinary  individual  does  not  understand  the  peculiar  features  of  the 
telephone  business,  and  does  not  look  beyond  the  telephone  on  the  wall 
or  on  the  desk.  He  does  not  take  into  consideration  that  the  real  busi¬ 
ness  of  a  telephone  company  is  to  furnish  service,  transmit  messages, 
and  not  merely  to  rent  instruments.  This  prevailing  idea  has  been 
constantly  brought  home  to  members  of  the  Committee  by  having  their 
attention  called  by  people  thus  uninformed  to  the  lower  rates  existing  in 
other  cities;  cities  between  which  and  Chicago  there  can  be  no  common 
basis  of  comparison.  Attention  is  called  to  some  of  the  reasons  for  this 
exception  to  that  rule  of  business,  so  well  established. 

“  Every  line  added  to  a  telephone  system  requires  the  addition  of 
telephone  central  office  equipment  to  every  other  line  in  the  exchange, 
so  that  the  new  line  may  be  connected  to  any  one  of  the  existing  lines. 
For  every  line  added  to  an  exchange,  the  company  must  not  only 
handle  the  additional  calls  originating  from  that  line,  but  must  provide 
for  the  additional  calls  originating  from  existing  lines  to  the  new  line. 
The  average  number  of  calls  per  telephone  increases  with  the  oppor¬ 
tunities  presented  for  calling. 

“  The  size  of  a  switchboard  to  serve  a  given  number  of  subscribers 
depends  upon  the  number  of  messages  handled  and  not  upon  the 
number  of  subscribers.  It  is  also  true  that  the  number  of  operators 
necessary  depends  upon  the  number  of  messages  sent  and  not  upon  the 
number  of  subscribers.  It  is  therefore  impossible  in  a  large  city  to 
locate  the  lines  of  all  subscribers  in  a  single  exchange.  Mechanical 
difficulties  interfere.  In  small  cities  one  exchange  is  usually  sufficient 
to  supply  the  demand  for  service. 

“  The  subdivision  of  a  city  into  exchange  districts,  with  an  exchange 
in  each  district,  necessitates  a  complete  system  of  intercommunication 
between  each  such  district  and  all  of  the  other  districts.  The  com¬ 
plexity  of  switchboard  wiring  and  the  multiplicity  of  trunking  facili¬ 
ties  form  very  expensive  items  of  plant  installation.  It  also  neces¬ 
sitates  the  handling  of  a  very  large  percentage  of  messages  twice.  In 
a  large  city  a  very  small  proportion  of  calls  are  completed  within  a 
single  exchange.  It  is  usually  conceded  that  about  eighty  per  cent  of 
such  calls  are  required  to  pass  through  a  second  exchange.  It  is  thus 
plain  to  see  how  both  the  investment  and  the  operating  cost  are  ac¬ 
cordingly  increased. 

“  In  a  small  city  the  business  day  is  longer  and  there  can  be  said  to 
be  no  excessively  busy  hours.  In  a  large  city  the  greater  volume  of 
the  business  is  transacted  in  a  comparatively  short  period  of  time.  The 
plant  must  therefore  be  constructed,  and  the  operating  force  provided, 
to  meet  the  business  demands  of  the  high  tension  hours — to  meet  the 
‘  peak’.  If  the  increased  business  of  the  busy  hours  could  be  spread 
over  the  full  business  day,  it  would  greatly  decrease  both  the  invest¬ 
ment  necessary  and  the  cost  of  operation. 

“  An  enlarged  exchange  means  an  enlarged  area  covered  and,  there¬ 
fore,  added  length  to  subscribers’  lines.  This  requires  a  proportionate 
increase  of  investment  for  wires  and  equipment. 

“  A  large  city  usually  has  a  greater  percentage  of  paved  streets,  and 
makes  more  extended  requirements  for  underground  work.  Thus  is 
increased  the  investment  necessary  for  installation  of  the  system  and 


234 


MUNICIPAL  FRANCHISES. 


the  expenses  of  maintenance  incident  to  the  repairing  of  wires  and 
cables  placed  underground. 

“  There  are  additional  causes  for  the  increased  cost  of  service,  such 
as  higher  wages  and  shorter  hours ;  destruction  of  underground  cables 
by  the  interference  of  foreign  electrical  currents;  higher  rates  of  taxes 
and  insurance ;  probable  higher  rates  of  compensation,  and  some  addi¬ 
tional  investment  for  the  benefit  of  the  city,  in  providing  space  on 
poles,  and  ducts  and  cables,  for  the  city’s  use.” 

The  Commission  of  experts  employed  by  the  Chicago  Com¬ 
mittee,  in  discussing  this  question  of  the  increase  of  telephone 
costs  with  the  expansion  of  the  business,  expressed  the  opin¬ 
ion  that  by  the  use  of  measured  rates  this  increase  could  be 
largely  prevented. 

“  It  is  a  tradition  in  telephone  circles  ”,  said  the  Commission,1  “that 
the  service  per  telephone  costs  more  as  the  number  of  telephones  con¬ 
nected  with  the  plant  increases.  As  the  number  of  telephones  increases, 
each  subscriber  has  the  opportunity  to  call  upon  more  people  by 
telephone,  and  the  law  of  averages  would  indicate  that  the  number  of 
calls  per  day  from  each  telephone  should  increase,  thus  making  the 
service  more  expensive  to  the  operating  company,  provided  the  service 
is  flat  rate  service  and  unnecessary  use  of  the  telephone  is  not  deterred 
by  a  measured  rate  charge.  This  condition  seems  to  have  worked  out 
in  practice,  according  to  the  statements  of  telephone  companies  at 
Cleveland,  Indianapolis  and  elsewhere,  and  flat  rate  service  seems  to 
increase  in  cost  per  telephone  as  the  number  of  telephones  attached  to 
a  system  increases. 

“  On  the  other  hand,  a  different  condition  exists  in  connection  with 
measured  rate  service.  With  the  measured  rate  service  the  message  is 
the  unit  instead  of  the  rental  of  the  instrument;  and  it  is  the  message 
that  the  subscriber  ought  to  pay  for,  because  it  is  for  the  purpose  of 
sending  his  messages  that  he  provides  himself  with  a  telephone.  With 
measured  rate  service  and  a  reasonable  use  of  the  telephone  lines,  the 
unavailing  calls  are  reduced  to  a  minimum.  The  number  of  calls  per 
telephone  per  day,  apparently,  is  not  inclined  to  increase  as  the  system 
increases  in  extent.  *  *  *  *  But  the  total  number  of  messages  handled 
increases  approximately  in  proportion  to  the  number  of  telephones. 
Under  these  conditions,  the  ordinary  laws  regulating  the  difference 
between  the  cost  of  producing  articles  in  large  and  small  quantities 
comes  into  play,  and  the  actual  cost  per  message  ought  to  steadily 
decrease.  Since  it  is  the  messages  that  are  paid  for  under  the  measured 
rate  system  and  the  actual  cost  per  message  ought  to  steadily  decrease 
as  the  system  enlarges,  the  average  amount  paid  by  each  subscriber 
will  decrease  if  the  subscribers  limit  the  use  of  their  telephones  to  their 
actual  needs  and  the  telephone  company  is  well  managed. 

“  The  difference  thus  arising  between  flat  rates  and  measured  rates  is 
very  marked.  The  flat  rate  telephone  user  tends  to  increase  his  number 
of  messages  as  the  system  enlarges,  so  that  the  average  calls  per  day 
per  telephone  may  be  expected  to  increase  and  the  proportion  of  un¬ 
availing  calls  also  to  increase.  The  consequence  is  that  the  company  is 
forced  to  handle  more  calls  per  telephone  as  the  system  becomes  larger, 

1  See  Report  of  Committee,  op.  cit.,  p.  74. 


THE  TELEPHONE. 


235 


and  the  price  per  telephone  has  to  increase  under  flat  rate  charges; 
while  the  subscribers  limit  their  use  of  the  telephone  to  their  actual 
needs  under  measured  rates  and  the  number  of  calls  per  telephone  does 
not  have  a  tendency  to  increase  as  tlie  system  increases  in  size  after  it 
has  reached  a  considerable  development  such  as  is  now  found  in  the 
City  of  Chicago.  Under  these  conditions  the  principle  of  wholesale 
production  makes  it  possible  for  the  company  to  reduce  its  cost  of 
operating  per  message  and  thereby  reduce  the  average  price  charged 
the  telephone  subscribers.” 

Mr.  Gansey  R.  Johnston,  General  Manager  of  the  Colum¬ 
bus  Citizens’  Telephone  Company,  in  a  pamphlet  published 
in  September,  1908,  by  the  International  Independent 
Telephone  Association,  discusses  this  question  of  the  increase 
of  costs  in  connection  with  his  explanation  of  the  reason  why 
Independent  companies  have  increased  their  rates.1  He  says : 

“  As  lines  are  added  to  a  telephone  plant,  the  cost  of  construction, 
maintenance  and  operation  of  each  new  and  of  each  old  line  tends 
to  increase  because  of  the  addition.  The  construction  cost  of  the 
new  lines  averages  greater  because  the  average  length  of  line 
increases  with  the  growth  of  the  plant.  The  construction  cost  of 
the  switchboard  connections  for  both  the  old  and  the  new  lines  increases 
because  facilities  must  be  provided  at  the  switchboard  to  connect  each 
line,  old  and  new,  with  every  other  line,  as  well  as  extra  facilities  for 
the  additional  traffic.  The  unit  of  operation  cost  increases  because,  as 
new  connections  are  provided,  there  is  additional  use  of  each  line.  For 
example,  each  subscriber  on  a  2,000-line  plant  uses  his  line  for  such 
business  as  he  has  occasion  to  do  with  those  two  thousand,  and  for  the 
entire  subscription  list  (without  taking  into  account  more  than  one 
person  for  each  line)  the  possible  demand  for  connections  is  limited  to 
the  square  of  2,000  less  2,000,  or  3,998,000.  If  the  plant  is  doubled, 
each  of  the  original  two  thousand  has  his  original  outgoing  and  incom¬ 
ing  calls  plus  what  he  has  with  the  additional  subscribers,  and  in  like 
manner  do  the  new  ones  have  more  than  did  the  old.  The  limit  of 
demand  in  this  case  on  the  same  basis  is  measured  by  the  square  of 
4,000,  less  4, 000, or  15,996,000.  If  the  plant  is  trebled,  then  the  limit  of 
the  demand  is  measured  by  a  number  nine  times  the  first  one  taken.  If 
the  number  of  persons  using  each  telephone  should  be  taken  into 
account,  the  increase  would  be  much  more  rapid  than  indicated. 
While  the  actual  demand  never  approaches  the  possible  demand,  it  is 
certain  to  increase  in  greater  ratio  than  by  simple  addition.  The 
additional  traffic  means  more  work  for  operators  and  consequently 
more  operators  proportionately,  and  greater  wear  and  consequently  a 
higher  maintenance  charge  for  each  line.  As  the  size  of  the  plant 
grows,  the  operators  work  under  increasing  physical  difficulties,  and 
with  still  greater  growth  the  line  connections  get  beyond  the  operator’s 
length  of  arm,  so  that  the  separation  of  switchboards  is  necessary. 
The  average  maintenance  charge  is  increased,  not  only  by  the  wear, 
but  by  the  existence  of  the  additional  central  office  equipment  and  the 
longer  length  of  lines  to  be  kept  in  repair  and  ultimately  replaced.  On 

1  “Some  Comments  on  the  1907  Annual  Report  of  the  American  Telephone  and 
Telegraph  Company  ”,  p.  5. 


236 


MUNICIPAL  FRANCHISES. 


a  very  large  plant  certain  traffic,  trunking,  and  transmission  difficulties 
require  large  expenditures  in  their  overcoming.  Not  only  does  the 
cost  increase  as  outlined,  but  also  does  the  value  to  the  user  increase. 
If  the  telephone  charge  were  based  on  a  unit  of  use,  as  in  the  ordinary 
business,  then  probably  the  telephone  business  would  be  more  analog¬ 
ous  to  the  ordinary  business;  although  even  such  charge  would  not 
afford  relief  from  the  extra  elements  of  construction  and  maintenance 
costs.  Within  certain  limits  the  public  gains  more  from  the  larger 
number  of  connections  than  it  loses  by  paying  an  increased  charge  for 
line  rental,  if  indeed  the  charge  is  not  left  stationary.” 

Further  along  in  his  pamphlet,  Mr.  Johnston  says  that  his 
company,  which  uses  the  automatic  system,  “  is  experiment¬ 
ing,  with  prospects  of  success,  in  the  construction  of  branch 
exchanges  of  small  units,  whereby  the  maximum  distance  is 
traversed  by  trunking  cable  and  the  minimum  by  subscribers’ 
cables.” 

“In  these  branches”,  says  he,  “is  the  minimum  equipment  connect¬ 
ing  with  maximum  common  equipment  at  the  main  exchange.  Opera¬ 
tion  through  the  branch  exchanges  involves  no  additional  operating 
employes  and  no  additional  burden  upon  the  subscriber,  vrho  is  his  own 
operator.  There  are  fair  prospects  through  further  inventional  prog¬ 
ress  of  reducing  the  number  of  trunking  wires  below  any  proportion 
heretofore  known,  and  of  increasing  the  adaptability  of  existing  cable 
plants  beyond  that  of  any  plants  heretofore  known.” 

It  is  evident  that  if  the  length  of  subscribers’  wires  could 
be  kept  from  increasing  with  the  enlargement  of  the  area 
over  which  unified  telephone  service  is  given,  one  important 
element  in  the  alleged  increase  of  unit  cost  would  be  elim¬ 
inated.  Even  as  it  is,  available  statistics  do  not  seem  to  prove 
that  the  average  length  of  wire  per  subscriber  always  in¬ 
creases  with  the  number  of  subscribers.  From  the  report  of 
the  Massachusetts  Highway  Commission  for  1908,  I  have 
compiled  the  following  figures,  relative  to  the  five  companies 
having  the  largest  number  of  subscribers  within  that  state. 


First 

company.1 

Second 

company.2 

Third 

company.8 

Fourth 

company.4 

Fifth 

company.6 

Number  of  subscrib¬ 
ers . 

1,043 

1,068 

1,148 

18,855 

161,209 

Miles  of  wire  per  sub¬ 
scriber . 

2.10 

2.35 

3.07 

2.29 

2.68 

1  Automatic  Telephone  Co,  of  New  Bedford,  Report,  p.  153. 

2  Providence  Telephone  Co.  of  Massachusetts,  Ibid .,  p.  181. 
8  Fall  River  Automatic  Telephone  Co.,  Ibid.,  p.  163. 

4  Southerr  Massachusetts  Telephone  Co.,  Ibid.,  p.  188. 

6  New  England  Telephone  and  Telegraph  Co.,  Ibid.,  p.  176. 


THE  TELEPHONE. 


237 


If  in  addition  to  keeping  the  average  length  of  wire  from 
increasing,  we  could  also  keep  the  average  use  of  the  tele¬ 
phone  from  growing  with  the  size  of  the  exchange,  it  is  clear 
that  the  Chicago  Telephone  Commission’s  hope  of  decreas¬ 
ing  rates  would  be  something  more  than  a  pleasant  dream. 
It  is  not  to  be  believed,  however,  that  the  average  use  of  the 
telephone  will  fail  to  increase  in  the  long  run  as  the  size  of 
the  exchange  increases,  unless  it  be  as  a  result  of  the  exten¬ 
sion  of  the  service  to  classes  of  people  who  have  less  use  for 
the  telephone  than  the  earlier  subscribers  have. 

141.  Competition  vs.  monopoly. — Upon  this  question  the 
Bell  companies  and  the  Independent  companies  are  at  vari¬ 
ance.  It  is  a  part  of  the  business  policy  of  the  Bell  com¬ 
panies  to  show  the  benefits  of  monopoly  service,  while  the 
Independents  place  their  main  reliance  upon  the  argument 
for  competition.  The  reason  for  this  difference  is  obvious. 
The  Bell  companies,  having  long  enjoyed  a  monopoly,  have 
been  loath  to  lose  it,  while  the  Independent  companies,  in  the 
nature  of  the  case,  could  not  get  a  “  look  in  ”  except  on  the 
basis  of  a  competing  service.  In  the  report  of  the  directors  of 
the  American  Telephone  and  Telegraph  Company  for  1907, 
the  attitude  of  the  Bell  interests  toward  competition  is 
strongly  put. 

“  The  value  of  any  exchange  system  ”,  says  this  report,1  “  is  measured 
by  the  number  of  the  members  of  any  community  that  are  connected 
with  it.  If  there  are  two  systems,  neither  of  them  serving  all,  impor¬ 
tant  users  must  be  connected  with  both  systems.  Connection  with  only 
one  is  of  but  partial  value  and  cannot  be  satisfactory.  Two  exchange 
systems  in  the  same  community,  each  serving  the  same  members,  can¬ 
not  be  conceived  of  as  a  permanency,  nor  can  the  service  in  either  be 
furnished  at  any  material  reduction  because  of  the  competition,  if  re¬ 
turn  on  investment  and  proper  maintenance  are  taken  into  account. 
Duplication  of  plant  is  a  waste  to  the  investor.  Duplication  of  charges 
is  a  waste  to  the  user. 

“  The  advantages  claimed  for  competition  are  lower  rates  and  im¬ 
proved  service.  Exhaustive  competition  may  temporarily  produce 
either  or  both  of  these  results,  but,  as  before  stated,  this  temporary 
gain  is  purchased  by  an  excessive  waste.  Duplication  of  plant  and 
operation  cannot  produce  either  result  without  exhaustive  competition. 
Given  the  same  management,  the  public  must  pay  double  rates  for 
service,  to  meet  double  charges,  on  double  capital,  double  operating 
expenses  and  double  maintenance.  In  most  cases  of  proposed  competi¬ 
tion  an  examination  of  the  prospectus  will  show  that,  by  some  process, 
it  is  expected  to  make  good  a  capitalization  equal  to  at  least  two  or  three 
times  the  actual  cost  of  the  construction.  The  only  benefits  are  to  the 
promoter. 


» Page  17. 


238 


MUNICIPAL  FRANCHISES. 


“  It  is  contended  that  if  there  is  to  be  no  competition,  there  should  be 
public  control. 

“  It  is  not  believed  that  there  is  any  serious  objection  to  such  control, 
provided  it  is  independent,  intelligent,  considerate,  thorough  and  just, 
recognizing,  as  does  the  Interstate  Commerce  Commission  in  its  report 
recently  issued,  that  capital  is  entitled  to  its  fair  return,  and  good  man¬ 
agement  or  enterprise  to  its  reward.” 

In  answer  to  this  argument  the  Independent  Telephone 
Association  appealed  to  the  experience  of  Columbus,  Ohio. 
In  that  city  the  Independent  company  began  agitation  for 
a  franchise  late  in  1898,  when  the  Bell  company  had  less  than 
1,900  telephones,  with  rates,  near  the  center  of  the  city,  as 
high  as  $96  a  year  for  business  places  and  $48  a  year  for 
residences,  with  additional  charges  for  distance  beyond  one 
mile  from  the  exchange.  Since  that  time  the  Bell  rates  have 
been  reduced  to  $54  for  business  telephones  and  $27  for  res¬ 
idence  telephones  throughout  the  city.  In  the  mean  time  the 
number  of  telephones  in  use  has  increased  until  each  com¬ 
pany  serves  approximately  12,000  subscribers.  The  manager 
of  the  Independent  company  figures  out  how  much  the  sub¬ 
scribers  in  his  system  saved  during  the  years  1900-1907,  as 
compared  with  what  they  would  have  had  to  pay  at  the  Bell 
rates  which  were  in- force  at  the  same  time.  According  to 
this  estimate,  there  was  a  total  saving,  during  these  years,  of 
$664,000.  He  argues  that  the  reduction  of  rates,  as  well  as 
the  great  expansion  of  service,  was  due  to  competition.  He 
also  urges,  in  favor  of  competition,  that  only  a  small  per¬ 
centage  of  the  total  number  of  telephone  subscribers  are  com¬ 
pelled  to  pay  duplicate  charges  by  reason  of  using  both 
systems. 

“  In  Columbus  something  like  15  per  cent  of  the  telephones  are  dup¬ 
licated”,  says  he.1  “The  bulk  of  these  duplications  are  business 
telephones.  Many  of  these  duplicate  users  would  have  two  or  more 
telephones  if  there  were  but  one  system.  Many  others  get  benefits 
from  their  telephone  service  so  far  beyond  its  cost  that  the  cost  is  in  no 
sense  a  burden  or  a  waste.  The  cost  of  a  business  telephone  on  the  one 
plant  is  11  cents  a  day,  and  on  the  other  15.  If  incoming  or  outgoing 
calls  are  worth  on  the  average  5  cents  apiece,  then  three  a  day  will  pay 
for  the  assumed  wasteful  duplicate  charge.” 

He  also  claims,  in  defense  of  competition,  that  the  amount 
of  duplication  of  plant  involved  is  comparatively  small,  being 
only  about  twenty  per  cent  of  the  total. 

1  “Some  Comments  on  the  1907  Annual  Report  of  the  American  Telephone  and 
Telegraph  Company,”  op.  cit.,  p.  13. 


THE  TELEPHONE. 


239 


“The  most  expensive  elements  of  a  telephone  plant  ”,  says  he,  “are 
individual  for  each  subscriber.  The  largest  single  investment  item  is 
cable  and  line  wire.  ” 

Without  giving  any  definite  figures,  he  goes  into  a  discussion 
of  the  various  items  of  telephone  equipment,  attempting  to 
show  that,  for  the  most  part,  there  is  no  large  percentage  of 
waste  by  reason  of  duplication.  As  a  further  argument 
against  monopoly,  he  urges  that  the  stimulus  of  competition 
leads  to  marked  improvement  in  the  service.  He  also  urges 
that  the  great  bulk  of  subscribers  who  cannot  afford  to  pay 
for  unlimited  service  in  a  large  exchange,  are  more  cheaply 
served  by  the  partial  service  of  a  small  competitive  exchange. 
This  argument  is  based  on  one  set  forth  in  the  preceding 
section,  to  the  effect  that  telephone  service  becomes  more  ex¬ 
pensive  per  unit  with  the  increase  in  the  number  of  units. 
The  Independents  urge,  with  some  justice,  that  the  great 
bulk  of  telephone  subscribers,  to  whom  the  telephone  is 
coming  to  be  a  necessity,  need  it  primarily  for  connection 
with  the  physician,  the  grocer,  the  butcher,  and  other  trades¬ 
men,  who,  from  the  nature  of  their  businesses,  naturally  are 
subscribers  to  both  systems. 

The  Merchants’  Association  of  New  York,  on  June  29, 
1905,  addressed  a  communication  to  the  Board  of  Estimate 
and  Apportionment  of  that  city  in  opposition  to  the  grant  of 
a  franchise  to  any  Independent  telephone  company.  Quoting 
from  the  report  of  its  special  telephone  committee,  the 
Association  said  :x 

“The  effect  of  two  rival  telephone  systems  in  one  city  is  to  divide 
the  population  into  two  parts,  without  means  of  telephone  communica¬ 
tion  with  each  other  except  at  excessive  cost.  While  a  single  system 
promotes  general  intercommunication,  two  systems  make  it  impractic¬ 
able.  Two  systems  therefore  greatly  restrict  the  utility  of  the  tele¬ 
phone,  seriously  impair  its  value  and  impede  its  commercial  develop¬ 
ment. 

“It  has  been  shown  that  a  single  system  can  perform  the  desired 
service  much  more  efficiently  and  at  less  aggregate  cost  than  two 
systems  can.  It  is  obvious  that  two  systems  involve  extensive  duplica¬ 
tion  of  plant  and  organization,  which  entails  a  heavy  additional  burden 
of  fixed  charges  and  operating  expenses,  much  of  which  would  be 
unnecessary  if  the  service  were  performed  by  a  single  system.  This 
duplicated  outlay,  being  in  excess  of  the  amount  really  necessary  to 
perform  the  service,  is  an  economic  waste.  In  telephone  operation  no 
compensatory  benefits  to  users  in  the  form  of  lesser  cost  of  service  or 
increased  efficiency  have  yet  developed  to  justify  this  waste.  The 

1  Inquiry  into  Telephone  Service  and  Rates,  op.  tit .,  p.  86. 


240 


MUNICIPAL  FRANCHISES. 


dangers  coming  from  it  are  easily  seen.  Unless  it  is  provided  for  in 
the  charges  exacted  from  consumers  the  capital  investment  will  be 
gradually  eaten  up.  In  the  meantime,  as  abundant  experience  in  rail¬ 
road  competition  has  shown,  equipment  will  be  permitted  to  deteriorate, 
operating  expenses  will  be  reduced  below  the  proper  limit  and  the 
efficiency  of  service  will  be  lowered. 

“  In  the  opinion  of  this  committee,  competition  in  telephone  service 
is  not  a  public  benefit  and  not  a  useful  means  of  regulating  telephone 
charges.  As  shown  above,  little  or  no  benefit  accrues  to  any  part  of 
the  public  in  the  way  of  reduced  rates,  many  consumers  are  compelled 
to  increase  their  aggregate  outlay,  the  utility  of  the  service  is  cut  in 
half,  expansion  made  difficult,  the  efficiency  of  the  service  threatened 
and  the  capital  investment  endangered. 

“  Competition  in  telephone  service  does  not  offer  a  choice  of  benefits, 
but  compels  a  choice  of  evils — either  a  half-service  or  a  double  price/’ 

In  a  supplemental  report  presented  to  the  Merchants’ 
Association  September  18,  1905,  the  Telephone  Committee 
set  forth  a  considerable  amount  of  interesting  data  bearing 
upon  the  effect  of  competition  on  quality  of  service  and  on 
the  development  of  telephone  use.1  In  this  report  it  is 
stated  that  the  Bell  companies  were  not  until  recently  under 
centralized  management  and  that  “  in  consequence  there 
has  been  much  variation  in  the  character  of  the  service  ren¬ 
dered  in  different  districts.  In  many  cities  where  compe¬ 
tition  does  not  exist,  as  well  as  in  those  where  there  has  been 
but  little  competition,  the  service  of  the  local  Bell  companies 
has  been  maintained  at  the  highest  point.”  2  In  other  in¬ 
stances,  however,  it  is  stated  that  “  the  alleged  former  incapac¬ 
ity,  indifference  and  arrogance  of  the  local  Bell  managements 
have  been  said  to  be  responsible  for  public  exasperation  and 
just  irritation  at  the  defective  service  rendered  and  the  neg¬ 
ligence  of  the  methods  of  operation.  In  the  latter  cases 
competition  has  exercised  a  most  beneficial  influence  by  com¬ 
pelling  the  complete  reorganization  of  methods  where  they 
have  been  inefficient,  and  causing  the  adoption  in  some  cases 
of  improvements  which  had  theretofore  been  delayed  ”.8  The 
Committee  gives  figures  to  show  the  development  of  the  use 
of  the  telephone  at  competitive  points,  as  compared  with 
non-competitive  points.  Of  the  23  cities  for  which  figures 
are  given,  it  appears  that  Denver  and  San  Francisco,  without 
telephone  competition,  have  a  larger  number  of  telephone 
subscribers  per  hundred  of  population  than  any  of  the  other 

1  “Telephone  Competition  in  Various  American  Cities.” 

1  Ibid.,  p.  18. 

*  Ibid.,  p.  19. 


THE  TELEPHONE. 


241 


cities.  “  Other  causes  than  competition ”,  says  the  report, 
“  have  operated  to  produce  development.  The  fact  is  that  it 
has  been  as  great,  or  greater,  in  the  areas  where  competition 
does  not  exist  than  in  those  districts  where  competition  has 
exerted  its  force  to  the  utmost.”  As  regards  the  number  of 
subscribers  at  competitive  points  who  feel  themselves  obliged 
to  use  both  systems  figures  presented  by  this  Committee  for 
July  1,  1905,  showed  that  in  36  cities,  where  each  of  the  com¬ 
peting  telephone  systems  had  at  least  20  per  cent  of  the 
total  number  of  subscribers,  on  the  average  16  per  cent  of  all 
subscribers  were  connected  with  both  systems.  In  many  cases 
more  than  half  of  the  subscribers  of  the  weaker  system  were 
also  subscribers  of  its  stronger  rival. 

The  New  Orleans  Board  of  Trade,  in  its  telephone  report  in 
1908,  discussing  the  question  of  one  or  more  systems,  had 
this  to  say:1 

“  After  giving  the  question  our  closest  and  most  careful  considera¬ 
tion,  and  after  having  gone  over  the  evidence  gathered  in  connection 
with  our  work,  we  are  unalterably  opposed  to  two  or  more  systems,  for 
the  following  reasons: — 

‘‘1st.  A  single  system  provides  for  general  intercommunication; 
whereas,  two  or  more  systems  render  thorough  intercommunication 
impossible,  and  divide  the  population  of  a  city  into  two  camps. 

“  2nd.  Two  or  more  systems  force  the  individual  users  to  either  be 
content  with  half  a  service,  or  pay,  if  not  a  double,  at  least  a  greatly 
increased,  cost  for  a  full  service. 

“3rd.  Where  there  are  two  or  more  systems,  the  business  man  is 
obliged  to  take  both,  and  although  it  is  true  that  in  some  instances  it 
has  been  possible  to  get  a  measured  service  rate  telephone  from  one 
company  and  a  flat  rate  telephone  from  the  other  company,  for  approxi¬ 
mately  the  price  formerly  paid  to  a  single  company  before  competition 
entered  the  field,  this  is  only  where  rates  have  been  cut  by  both  sides 
to  a  point  where  they  are  no  longer  profitable,  and  financial  disaster  is 
the  result. 

“  4th.  In  every  city  where  an  exhaustive  investigation  has  been  made 
recently  into  the  telephone  situation,  they  have  in  every  case  recom¬ 
mended  only  the  adoption  of  one  system,  under  such  control  of  the 
state  or  city  government  as  to  properly  regulate  it. 

“With  these  facts  before  us,  and  the  overwhelming  testimony  we 
have  obtained  from  other  cities  against  two  or  more  systems,  it  is  our 
opinion  that  the  interests  of  the  city  will  be  best  served  by  having 
only  one  system ;  provided,  always,  that  the  proper  regulations  as  to 
service,  rates  and  extension  of  its  business  can  be  enforced  so  as  to 
safe-guard  the  rights  of  the  public.” 

The  extent  to  which  competition  has  been  tried,  may  be  seen 
from  figures  given  by  the  special  report  of  the  Census  for 

1  “  Telephone  Conditions  in  New  Orleans,  La.”,  op.  cit .,  p.  11. 


242 


MUNICIPAL  FRANCHISES. 


1902. 1  According  to  this  report,  of  the  1,051  incorporated 
places  in  the  United  States  having  a  population  of  4,000  or 
over,  telephone  facilities  were  provided  at  that  time  in  1,002. 
Out  of  this  number  the  Independents  had  a  monopoly  in  137 
places,  and  the  Bell  companies  in  414,  while  both  systems 
were  established  in  451. 

142.  Measured  rates  vs.  flat  rates — It  is  frequently 

pointed  out  that  in  the  early  days  of  the  telephone  business  the 
companies  made  a  serious  mistake  in  regard  to  the  basis 
of  rates.  In  the  absence  of  adequate  data  relative  to  the  cost 
of  service  in  detail,  the  plan  was  adopted  of  dividing  the  ex¬ 
penses  of  maintenance  and  operation,  plus  profits  and  fixed 
charges,  by  the  total  number  of  telephones  in  use,  and 
assessing  the  quotient  to  each  subscriber.  This  “  flat  rate 
service”  obviated  the  necessity  of  meters.  In  small  com¬ 
munities,  with  a  differentiation  of  rates  as  between  business 
places  and  residences,  it  worked  out  with  approximate 
satisfaction  to  all  concerned.  In  the  larger  cities,  however, 
with  the  increasing  cost  of  universal  service  and  the  great 
differences  in  the  amount  of  use  on  the  part  of  the  different 
subscribers,  flat  rates  became  a  burden  upon  the  business  and 
upon  the  public.  They  made  telephones  so  expensive  that 
ordinary  people  could  not  afford  them  in  their  residences, 
while  at  the  same  time  these  rates  resulted  in  a  marked  in¬ 
justice  to  small  business  places,  which  were  compelled  to  pay 
as  much  for  their  telephones  as  the  big  stores  and  offices.  The 
necessity  of  adjusting  rates  in  the  large  communities  so  as  to 
multiply  the  number  of  subscribers  and  cater  to  the  needs  of 
those  who  have  only  a  limited  use  for  the  telephone,  has 
caused  a  general  movement  toward  the  establishment  of 
measured  rates.  Telephone  men  and  those  who  have  made  a 
special  study  of  this  utility,  have  come  to  see  that  the  rental 
of  the  telephone  equipment  is  secondary  in  importance  to  the 
payment  for  service  rendered  whenever  a  connection  is  made. 

“  A  strictly  flat  rate  telephone  charge  to  all  patrons”,  says  Mr.  Hall, 
in  the  report  to  which  I  have  already  referred,2  “  is  every  bit  as  unfair  as 
a  similar  charge  for  gas  or  electric  light  would  be.  No  one  will  deny 
that  it  would  be  absurd  to  charge  a  fixed  rate  per  year  for  gas  burners, 
regardless  of  the  quantity  of  gas  burned.  Before  electric  meters  were 
perfected,  incandescent  lamps  were  charged  for  at  a  fixed  rate,  which, 
as  in  the  case  of  the  telephone  to-day,  was  lower  for  residences  than  for 

1  Bulletin  17,  “Telephones  and  Telegraphs  ”,  op.  cit. 

*  “Telephone  Conditions  in  New  Orleans,  La.,  op.  cit.,  p.  44. 


THE  TELEPHONE. 


243 


business  places.  It  is  pointed  out  in  the  report  of  the  Chicago  Special 
Telephone  Commission  that  as  long  as  this  unfair  and  unbusinesslike 
method  was  in  vogue,  electric  lighting  remained  a  luxury.  With  the 
advent  of  charges  for  actual  consumption  (that  is,  measured  rates)  elec¬ 
tric  light  came  within  the  reach  of  the  great  proportion  of  people  who 
now  use  it. 

‘  ‘  To  illustrate  my  meaning  more  forcefully,  the  flat  rate  for  all  patrons, 
whereby  a  fixed  sum  is  charged  for  the  use  of  the  telephone  instrument 
irrespective  of  the  number  of  messages  sent,  is  like  conducting  a  restau¬ 
rant  on  the  plan  of  hiring  a  knife  and  fork  to  each  customer  at  a  fixed 
rate,  which  would  be  the  same  whether  a  man  had  the  run  of  the  entire 
kitchen  or  only  ordered  ham  and  eggs.  ****** 

‘  ‘  To  my  mind,  the  proper  way  to  charge  for  telephone  service  is  to 
fix  a  flat  rate  for  the  privilege  of  connection  with  the  exchange  and  for 
the  hire  of  the  instrument  itself,  and  then  to  charge  a  given  sum  for  each 
message  sent.  The  charge  for  connection  with  the  exchange  should  be 
sufficient  to  cover  interest  and  sinking  fund  charges  on  the  investment 
of  fresh  capital  represented  by  each  additional  subscriber,  and  the  charge 
per  message  should  be  governed  by  the  traffic  and  expense  of  the 
exchange.” 

The  Chicago  Telephone  Commission,  in  its  1907  report, 
discusses  the  question  of  measured  rates  or  flat  rates  in  con¬ 
siderable  detail.  After  pointing  out  that  the  flat  rate  system 
admits  of  only  a  relatively  siflall  differentiation  of  rates 
according  to  use,  the  Commission  says : 1 

“The  measured  rate  arrangement  manifestly  makes  it  possible  to  re¬ 
duce  the  price  of  the  telephone  to  the  small  user  to  the  smallest  possible 
annual  charge,  that  is,  to  a  charge  which  is  just  sufficient  to  cover  a 
reasonable  interest  and  depreciation  for  the  portion  of  the  plant  that 
must  be  set  aside  for  the  use  of  that  individual  user  (or  the  average  of 
the  users  in  his  particular  class),  increased  by  an  amount  which  is  pro¬ 
portional  to  the  actual  number  of  messages  transmitted  from  his  telephone 
in  the  year.  It  is  only  by  this  arrangement  that  large  city  service  may 
be  extended  to  the  small  business  men  and  the  small  residence  and 
apartment  dwellers  who  may  be  unwilling  to  pay  more  than  from 
eighteen  to  twenty-four  dollars  per  year,  and  this  sort  of  customers 
constitutes  a  remarkably  large  proportion  of  the  total  telephone  using 
population  of  a  large  city  like  Chicago.  When  the  measured  rates  are 
introduced  exclusively  and  carried  to  their  logical  conclusion,  it  may 
increase  the  cost  of  telephone  service  to  the  largest  business  users,  but 
these  users  are  even  then  charged  no  more  than  the  actual  service  ren¬ 
dered  to  them  costs  the  company,  plus  an  appropriate  amount  to 
represent  interest  on  the  investment;  and  it  is  an  obvious  business 
principle  that  each  class  of  service  should  not  only '  be  satisfactory  to 
the  users,  but  should  also  return  its  reasonable  proportion  of  remunera¬ 
tion  to  the  company  furnishing  the  service.” 

The  Commission  also  points  out  that  the  great  increase  in 
the  number  of  telephones  in  use  in  Chicago  dates  from  the 
time  when  measured  rate  service  was  installed.  Commenting 

1  Report  of  Committee,  etc.,  op.  cit.,  p.  68. 


244 


MUNICIPAL  FRANCHISES. 


upon  the  effect  of  measured  rates  upon  the  number  of  calls, 
the  Commission  says : 1 

“  The  frivolous  and  useless  messages  can  be  largely  cut  off  by  mak¬ 
ing  measured  rates  of  service,  since  even  a  small  charge  per  message 
becomes  a  marked  deterrent  to  the  needless  use  of  the  telephone.  *  *  * 
The  number  of  telephones  has  been  steadily  increasing  in  Chicago,  and 
the  total  number  of  telephone  calls  per  day  has  also  been  steadily  in¬ 
creasing,  but  the  average  number  of  daily  calls  emanating  from  the 
individual  telephones  began  to  decrease  in  1899  and  has  decreased  from 
an  average  approximating  sixteen  calls  per  telephone  per  day  to  an 
average  approximating  nine  calls  per  telephone  per  day.  The  time 
that  this  decrease  began  is  concurrent  with  the  introduction  of  measured 
rates,  and  during  the  four  years  while  the  measured  rates  were  coming 
into  vogue  the  average  daily  calls  per  telephone  in  the  city  were  steadily 
decreasing  until  they  have  now  reached  an  apparently  fixed  value  that 
is  determined  to  a  considerable  degree  by  the  remaining  flat  rate  tele¬ 
phones  which  involve  an  overuse  of  the  lines.” 

It  was  pointed  out  that  approximately  one-third  of  the 
daily  calls  in  Chicago  were  unavailing,  and  that  one-half  of 
these  were  caused  by  the  overuse  of  lines  which  were  reported 
“  busy.”  The  Commission  expressed  the  opinion  that  an 
extension  of  the  flat  rate  service  “  would  tend  to  so  greatly 
increase  the  useless  calls  over  the  telephones  and  so  overload 
the  lines,  that  the  unavailing  calls  would  increase  tremen¬ 
dously,  making  the  daily  calls  per  telephone  even  larger  than 
they  were  in  1896,  and  thus  increase  the  annual  expense  of  the 
service  so  largely  that  the  average  price  per  telephone  would 
be  given  a  tendency  to  rise  instead  of  fall  ”.2 

The  problem  of  rates  in  connection  with  a  complex  tele¬ 
phone  system,  is  perhaps  as  difficult  as  the  corresponding- 
question  of  rates  for  the  supply  of  electrical  current  in  a  great 
city.  Moreover,  the  principles  upon  which  the  schedules  of 
rates  should  be  based,  are  somewhat  different.  Usually,  an 
electric  company  furnishes  only  that  part  of  the  interior 
equipment  represented  by  the  ordinary  lamps,  while  the  tele¬ 
phone  company  supplies  the  equipment  complete,  including 
the  necessary  wiring.  Furthermore,  the  individual  equip¬ 
ment  of  the  subscribers  constitutes  a  much  larger  proportion 
of  a  telephone  plant  than  is  the  case  with  an  electric  lighting 
and  power  plant.  For  this  reason  there  is  better  ground  for 
a  minimum  rental  charge  than  for  the  corresponding  meter 
charges  in  connection  with  the  supply  of  gas  and  electricity. 


1  Report  of  Committee,  etc.,  op.  cit„  p.  71. 
1  Ibid.,  p.  74. 


THE  TELEPHONE. 


245 


It  is  proper,  therefore,  that  the  principle  of  “the  greatest 
good  to  the  greatest  number  ”  should  be  subserved  by  a  com¬ 
bination  of  rental  charges  and  message  rates,  as  suggested 
by  Mr.  Hall.  This  question  has  an  important  bearing  upon 
the  question  of  competition  versus  monopoly,  which  was 
discussed  in  the  preceding  paragraph;  for  if  by  the  introduc¬ 
tion  of  measured  rates  it  is  possible  for  the  great  mass  of 
subscribers  to  be  given  a  limited  and  efficient  service  at  a 
low  rate,  even  though  they  are  connected  with  a  universal 
exchange  in  a  great  city,  one  of  the  most  plausible  arguments 
in  favor  of  competition  will  be  overcome.  Indeed,  if  it 
should  prove  true  that  through  the  introduction  of  a  proper 
rate  schedule  the  cost  per  unit  of  service  can  be  made  to 
decrease  rather  than  to  increase  with  the  number  of  telephone 
subscribers  in  a  given  system,  one  of  the  most  fundamental 
peculiarities  of  the  telephone  business  will  have  been 
removed.  The  advantages  of  monopoly,  from  the  standpoint 
of  the  telephone  user,  are  so  marked  that  the  removal  of  any 
excuse  for  the  establishment  of  competing  systems  is  to  be 
welcomed  by  the  public. 

143.  Discrimination  in  telephone  rates. — The  Wisconsin 
Eailroad  Commission,  which  since  the  enactment  of  the 
Public  Utilities  Law  in  that  state  on  July  9,  1907,  has  had 
jurisdiction  over  the  service  and  rates  of  telephone  companies, 
has  made  a  special  investigation  of  free  and  reduced  rate  tele¬ 
phone  service  within  that  state.1  It  found  many  classes  of 
discrimination  arising  from  various  causes.  There  were 
reported  to  the  Commission  about  75  free  telephones  in  rail¬ 
road  stations.  Some  of  the  companies  explained  that  they 
needed  the  depot  service  very  much  for  the  benefit  of  their 
subscribers,  and  in  one  case  a  competing  telephone  company 
thought  it  had  to  have  a  station  at  the  depot  in  order  to 
prevent  its  subscribers  from  going  over  to  the  other  company. 
It  is  obvious  that  in  cases  where  the  telephone  companies  are 
willing  to  maintain  free  stations  for  their  own  benefit  at 
depots,  the  railroad  companies  are  likely  to  hold  back  from 
paying  for  the  service.  The  Commission  also  found  that  there 
was  a  great  deal  of  free  service  rendered  by  telephone  com¬ 
panies  to  various  muncipalities  “  in  compliance  with  so-called 
franchise  requirements.”  It  was  also  found  in  some  cases  that 

1  See  Decision  and  Order  of  the  Commission,  June  12,  1908. 


246 


MUNICIPAL  FRANCHISES. 


free  telephones  had  been  installed  in  village  stores,  telegraph 
offices,  opera  houses,  express  offices,  electric  light  plants,  post- 
offices,  public  halls,  etc.,  because  telephone  subscribers  gen¬ 
erally  desired  to  be  able  to  reach  these  places.  This  explana¬ 
tion  was  specially  applicable  to  free  telephone  connections  for 
fire-alarm  purposes.  Occasionally  the  Commission  found  that 
the  telephone  companies  were  giving  free  private  service 
to  city  officials,  and  in  one  case  the  officials  of  the  police 
and  fire  departments  were  furnished  long  distance  service  free 
in  case  of  necessity.  Some  companies  gave  free  use  of  room 
on  their  poles,  lines  and  conduits  for  municipal  wires;  some 
gave  churches  and  ministers  free  service  or  reduced  rates; 
some  gave  special  rates  to  charitable  institutions  and  occa¬ 
sionally  a  hospital  had  free  telephones.  Various  social  clubs, 
lodges  and  Y.  M.  C.  A.  and  Y.  W.  C.  A.  organizations  were 
receiving  free  service.  In  some  cases  long  distance  pay  sta¬ 
tions,  with  free  local  service,  were  being  maintained  for  the 
benefit  of  these  organizations.  In  many  cases  free  service  was 
being  rendered  to  the  officers,  stockholders  and  employees  of 
the  company,  and  in  one  city  250  telephones  were  being  main¬ 
tained  absolutely  free  in  competition  with  another  telephone 
company.  In  some  cases  the  companies  were  giving  free 
service  for  a  limited  period  for  advertising  purposes,  and  in 
a  few  cases  complimentary  telephones  were  given  to  certain 
individuals.  Another  class  of  discrimination  was  shown  in 
the  practice  of  giving  telephone  service  in  exchange  for  serv¬ 
ices  or  goods  and  without  any  direct  monetary  consideration. 
This  included  free  service  in  some  hotels  in  exchange  for  the 
privilege  of  installing  pay  station  booths;  and  in  exchange 
of  free  telephone  service  with  electric  light  companies  for 
the  use  either  of  power  supplied  or  for  courtesies  in  connec¬ 
tion  with  the  use  of  pole  lines. 

The  reduced  rate  service  furnished  by  the  company  in¬ 
cluded  refunds  for  defective  service,  discounts  on  bills  paid 
in  advance,  discounts  on  bills  paid  before  a  certain  date,  dis¬ 
counts  for  persons  owning  their  own  instruments,  reduced 
rates  where  business  and  residence  telephone  service  were 
rendered  to  the  same  subscriber,  reduced  rates  where  one  sub¬ 
scriber  had  more  than  one  telephone  and  the  sale  of  long  dis¬ 
tance  coupon  books  at  a  discount.  In  some  cases  special  rates 
had  been  given  to  subscribers  under  individual  contracts,  and 


THE  TELEPHONE. 


247 


in  many  cases  special  rates  were  given  to  city,  village  and 
county  offices,  churches,  social  clubs  and  other  semi-public 
institutions. 

Acting  under  a  provision  of  the  Public  Utilities  Law  to  the 
effect  that  no  company  charging  or  receiving  from  any  per¬ 
son  a  greater  or  less  compensation  for  any  service  rendered 
than  that  prescribed  in  the  public  schedules  or  tariffs,  then 
in  force,  or  than  it  charges  or  receives  from  anyone  else  forv 
a  like  and  contemporaneous  service,  shall  be  deemed  guilty  of 
unjust  discrimination  and  be  subject  to  a  fine,  the  Com¬ 
mission  gave  its  findings  in  regard  to  various  kinds  of  ap¬ 
parent  discrimination  which  it  had  discovered.  It  found  in 
the  first  place  that  all  free  and  reduced  rate  service  was  abso¬ 
lutely  prohibited  by  law,  including  service  to  municipalities 
whether  expressly  provided  for  in  the  franchise  or  not.  “  It 
has  been  determined  that  a  municipality  has  no  power  to 
grant  a  franchise  to  a  telephone  company  ”,  said  the  Commis¬ 
sion.  “  An  ordinance  attempting  to  grant  such  a  franchise  is 
ineffectual  and  void.”  1  The  Commission  found,  however,  that 
the  law  of  Wisconsin  did  not  prohibit  the  company  from  giv¬ 
ing  free  service  to  the  employees  whom  the  management  of  the 
company  must  be  able  to  reach  in  order  to  supply  adequate 
service  to  the  public.  The  classification  of  telephone  patrons 
into  residence  and  business  subscribers  with  higher  rates  for 
the  latter  than  the  former  was  declared  to  be  lawful  and  per¬ 
missible  “  not  only  from  the  point  of  view  of  the  greater  cost 
of  supplying  business  service,  but  also  because  of  the  co¬ 
ordinate  principle  that  a  lower  rate  is  necessary  in  order 
that  a  sufficiently  large  number  of  subscribers  may  be  secured 
to  make’  the  telephone  valuable  to  business  subscribers  ”. 
The  Commission  also  found  that  this  classification  could  be 
extended  so  as  to  make  special  provisions  for  schools,  hospi¬ 
tals,  churches,  lodges,  Christian  associations  and  similar 
organizations  so  long  as  the  two  principles  of  cost  and  of  serv¬ 
ice  to  other  subscribers  were  kept  continually  in  view.  It  was 
declared  that  in  a  depot  where  a  railway  company  could  not 
reasonably  be  expected  to  pay  for  the  telephone  or  where  it 
was  already  paying  for  one  or  more  instruments,  a  company 
might  for  the  benefit  of  its  subscribers  place  a  pay  telephone 

1  This  finding  in  regard  to  the  law  applied  of  course  to  the  State  of  Wisconsin 
only  and  does  not  affect  the  powers  and  duties  of  municipalities  in  their  relation 
to  telephone  companies  in  other  states. 


248 


MUNICIPAL  FRANCHISES. 


in  the  station  so  that  telephone  subscribers  calling  up  the 
depot  would  get  free  service,  but  persons  sending  messages 
from  the  depot,  except  official  messages,  would  have  to  pay. 
In  the  judgment  of  the  Commission  it  was  not  feasible  to 
attempt  to  restrict  the  use  of  subscribers’  telephones  to  the 
subscribers  alone  and  the  immediate  members  of  their  fam¬ 
ilies.  It  was  admitted,  however,  that  this  would  be  a  proper 
restriction  wherever  it  was  feasible  to  enforce  it.  The  Com¬ 
mission  held  that  it  was  unlawful  to  exact  a  higher  rate  from 
subscribers  who  were  not  stockholders,  directors  or  officers  of 
the  company  than  from  those  who  were.  It  was  held  also 
that  where  the  place  of  business  and  the  residence  of  the  sub¬ 
scriber  were  in  the  same  building,  and  no  telephone  was  in¬ 
stalled  in  the  place  of  business,  the  company  should  charge 
the  business  rate  for  the  residence  telephone.  The  Commis¬ 
sion  also  held  that  where  a  telephone  company  offers  business 
and  residence  service,  a  separate  and  distinct  rate  should  be 
published  for  each,  and  that  the  so-called  combined  business 
and  residence  rate  which  would  be  less  than  the  sum  of  the  two 
rates  as  regularly  published  would  be  unlawful.  It  was  de¬ 
clared  to  be  lawful,  however,  to  offer  a  discount  for  the 
prompt  payment  of  bills  on  condition  that  the  discount  rates 
be  strictly  complied  with  and  without  discrimination.  The 
companies  were  authorized  to  charge  higher  proportional 
rates  for  telephones  installed  for  short  periods  of  time,  as  at 
summer  cottages  and  temporary  business  places.  They  were 
also  authorized  to  charge  a  special  fee  for  removing  a  tele¬ 
phone  from  one  address  to  another  after  the  first  installation, 
the  amount  of  the  fee  to  be  as  nearly  as  possible  the  actual 
cost  of  the  work. 

Undoubtedly,  as  the  telephone  business  develops,  there  will 
be  a  greater  reliance  upon  measured  rates  if  the  meter 
problem  can  be  satisfactorily  solved.  The  measured  rate 
system  immediately  raises  the  question  of  the  discrimination 
involved  in  charging  large  business  houses  a  smaller  rate 
per  message  than  is  charged  to  residences  and  small  business 
houses.  In  Chicago,  following  the  advice  of  the  special 
Telephone  Commission  of  1907,1  the  public  authorities  are 
endeavoring  to  have  the  company  keep  its  accounts  so  that 
the  cost  of  the  various  classes  of  service  may  be  made  the 

1  Report  of  Committee,  Sept.  3,  1907,  op.  cit .,  p.  124. 


THE  TELEPHONE. 


249 


basis  for  regulating  the  rate  schedules.1  It  is  probable,  how¬ 
ever,  that  the  same  objections  found  by  the  Massachusetts 
Board  of  Gas  and  Electric  Light  Commissioners  to  the  “  cost- 
of-service  ”  basis  for  the  rates  of  the  Boston  Edison  Company,2 
will  in  the  long  run  prevail,  and  the  system  of  telephone 
rates  will  gravitate  toward  a  fixed  charge  per  message  re¬ 
gardless  of  the  class  of  service  or  its  amount. 

144.  Telephone  equipment. — The  telephone  differs  from 
some  other  public  utilities  in  that  practically  the  entire  equip¬ 
ment  is  the  property  of  the  operating  company.  This  in¬ 
cludes  the  “  office  division  ”,  consisting  of  switchboards, 
registers,  dynamos,  batteries,  etc.,  and  the  “  line  division  ”, 
consisting  of  poles,  wires,  conduits,  transmitters,  receivers, 
etc.  In  some  cases  the  conduits  and  ducts  under  the  streets 
are  not  owned  by  the  telephone  companies,  but  are  rented 
either  from  the  city  or  from  a  company  holding  a  franchise 
to  build  and  supply  conduits  for  different  utilities.  In  some 
cases,  also,  the  poles  used  by  the  telephone  company  are 
owned  by  some  other  company  or  by  the  city.  There  are  also 
certain  accessory  fixtures,  not  in  common  use,  which  may 
in  some  instances  be  purchased  by  telephone  subscribers  in¬ 
dependently  of  the  telephone  company.  With  these  excep¬ 
tions,  the  entire  equipment  is  the  property  of  the  telephone 
company  or  its  “  parent  ”.  In  1907  the  Census  Bureau 
found  16,065  switchboards  in  use,  of  which  118  were  auto¬ 
matic  and  the  rest  manual.  Of  the  manual  switchboards, 
13,801  were  of  the  magneto  system;  and  2,146  of  the  com¬ 
mon  battery  type.3  In  a  business  which  has  developed  as 
rapidly  as  the  telephone  business,  it  is  necessary  that  certain 
parts  of  the  equipment  should  be  gauged  with  reference  to 
future  needs.  This  applies  particularly  to  switchboards,  pole 
lines  and  duct  space  in  conduits.  Mr.  Lindemuth,  already 
quoted  in  a  preceding  section,  admits  that  one  of  the  early 
mistakes  of  the  Independent  telephone  companies  was  that 
they  did  not  foresee  the  wonderful  growth  and  possibilities  of 
the  telephone  business.4  He  says  that  while  they  built  for 
double  the  capacity  of  the  Bell  companies  at  the  time  when 

1  See  Report  to  Commissioner  of  Public  Works  and  City  Comptroller  on  Regu. 
lation  of  Rates  under  Telephone  Ordinance  of  Nor.  6,  1907,  by  D.  C.  and  Wm.  B, 
Jackson,  Engineers  and  Arthur  Young  and  Co.,  Certified  Public  Accountants 
submitted  Dec.  30, 1908. 

2  Ante ,  section  72. 

8  Preliminary  Report  on  Telephones,  op.  cit. 

4  “  A  Larger  View.”  op.  cit.,  p.  4. 


250 


MUNICIPAL  FRANCHISES. 


competition  was  instituted,  under  the  stimulus  of  this  com¬ 
petition,  although  the  Bell  companies  had  had  exclusive  con¬ 
trol  of  the  business  for  nearly  20  years,  within  10  years  after 
competition  appeared  the  number  of  telephone  users  in  the 
country  increased  25-fold. 

“  In  view  of  this  stupendous  multiplication  in  telephone  subscribers,” 
says  he,  “  which  no  one  could  in  saneness  anticipate,  we,  in  most  cases, 
builded  too  small  and  accepted  a  schedule  of  rates,  fair  and  reasonable 
at  the  time,  but  which  are  not  now  commensurate  with  the  cost  and 
extent  of  the  service.” 

With  the  advance  of  the  telephonic  art  and  the  constant 
adjustment  to  the  demands  of  the  service,  great  changes  are 
taking  place  in  the  equipment  of  the  business.  The  substitu¬ 
tion  of  the  automatic  for  the  manual  switchboard  means  a 
complete  replacement  of  telephone  instruments,  both  at  sub¬ 
scribers5  stations  and  at  central.  At  the  present  time  the 
only  meters,  except  the  nickel-in-the-slot  machines,  are 
located  on  the  company’s  premises.  As  a  result  of  the  move¬ 
ment  for  measured  service,  there  naturally  arises  a  greater 
demand  for  a  satisfactory  meter.  Discussing  the  Chicago 
telephone  ordinance  with  reference  to  this  point,  Mr.  Henry 
B.  Baldwin,  at  a  meeting  of  the  Chicago  City  Club,  Septem¬ 
ber  25,  1907,  said : 1 

“  I  think  that  it  will  appeal  to  you,  and  to  thoughtful  men  generally 
that  when  they  propose  to  measure  our  service,  the  measurement,  the 
machine  to  do  the  measuring,  should  be  in  the  office  of  the  consumer 
and  subject  to  his  inspection  while  it  is  being  used.  It  should  be  sub¬ 
ject,  not  to  his  control,  but  to  his  inspection,  so  that  when  he  uses  his 
telephone  from  day  to  day  he  may  know  how  the  register  is  made  up  ; 
and  until  such  time  as  the  telephone  company  will  furnish  the  measure¬ 
ment  in  your  own  office,  the  existing  prices  should  not  be  exceeded  at 
any  rate.  In  other  words,  we  should  not  be  compelled  to  receive 
measured  service  when  the  instruments  of  measurement  are  wholly 
within  the  control  and  in  the  office  of  the  company.” 

Telephone  instruments  are  subject  to  rapid  depreciation, 
and  it  is  claimed  that  many  of  the  Independent  companies 
failed  to  make  provision  in  their  original  rates  to  cover  this 
depreciation,  so  that  after  a  few  years  they  were  compelled 
to  replace  their  equipment  by  the  investment  of  new  capital. 
x\n  instance  is  cited  of  the  Kinloch  Telephone  Company  of 
St.  Louis,  which  mortgaged  its  plant  in  1898  and  in  1905 
found  it  “  absolutely  necessary  to  provide  new  switchboards, 
shaft,  cables,  central  and  exchange  equipment,  etc.”  These 

1  See  the  City  Club  Bulletin,  Vol.  I.,  No.  17,  p.  186. 


THE  TELEPHONE. 


251 


renewals  covered  practically  one-half  of  the  company’s  plant. 
Not  having  provided  any  depreciation  fund,  it  became  neces¬ 
sary  for  the  company  to  raise  the  $1,000,000  that  it  needed 
by  a  high  finance  arrangement  with  the  Kinloch  Long  Dis¬ 
tance  Telephone  Company,  which  is  described  at  length  in 
the  report  of  the  New  Orleans  Board  of  Trade.1 

As  already  stated,  it  is  the  usual  custom  for  a  telephone 
company  to  furnish  all  equipment,  including  wiring  and  all 
telephone  instruments.  In  1907  Dr.  Julius  Garst  of 
Worcester,  to  whom  reference  has  already  been  made,2  sub¬ 
mitted  to  the  Massachusetts  legislature  a  proposed  act  per¬ 
mitting  a  subscriber  to  any  telephone  company  to  purchase 
in  the  open  market  and  connect  with  the  public  telephone 
line,  not  to  exceed  three  telephone  instruments,  provided  that 
such  instruments  should  conform  to  a  standard  to  he  pre¬ 
scribed  by  the  State  Highway  Commission  and  that  the 
connection  with  the  telephone  line  should  be  made  at  the  sub¬ 
scriber’s  expense.  In  support  of  this  proposition  Dr.  Garst 
called  attention  to  the  fact  that  the  telephone  patents  have 
expired  and  that  the  monopoly  which  is  advantageous  so  far 
as  operation  of  the  telephone  system  is  concerned  and  also 
from  the  standpoint  of  the  use  of  the  streets,  should  be 
strictly  limited  to  that  portion  of  the  system  which  is  neces¬ 
sary  to  connect  the  various  subscribers  together.  In  other 
words,  a  monopoly,  which  in  the  case  of  a  public  utility  is  re¬ 
garded  as  a  necessary  evil,  should  be  limited  to  the  narrowest 
possible  scope.  Inasmuch  as  telephone  instruments  can  now 
be  purchased  in  the  open  market  from  many  different  manu¬ 
facturers,  it  is  a  reasonable  contention  that  the  policy  of  the 
old  Bell  companies  in  forbidding  the  use  of  any  instruments 
not  furnished  by  them  in  connection  with  their  telephone 
lines,  should  be  resisted  by  the  public  authorities.  The  prices 
of  instruments  accessory  to  the  telephone  business  may  be 
regulated  by  competition.  Under  these  circumstances  it 
would  be  better  to  take  them  out  of  the  monopoly  and  sub¬ 
ject  them  to  regulation  by  competition  rather  than  to  leave 
them  in  the  monopoly,  subject  to  regulation  by  ordinance. 

1  “  Telephone  Conditions  in  New  Orleans,  La.,”  op.  cit.,  p.  105. 

*  Ante,  section  44,  note. 


CHAPTER  IX. 

TELEPHONE  FRANCHISE  REGULATIONS. 


145.  Public  control— Massachusetts.  151.  Competition  to  reduce  rates— In- 

146.  Monopoly  without  conditions — New  dianapolis. 

York  City.  152.  Competition  secured  through  the 

147.  Stringent  conditions  proposed  for  a  Initiative — Portland,  Oregon. 

competing  company — New  York  153.  Franchise  conditions  approved  by 
City.  the  Probate  Court— Toledo. 

148.  Monopoly  conditioned  by  ordinance  154.  Local  and  long  distance  Indepena- 

fixing  rates— Chicago.  ent  franchises  in  the  Twin  Cities— 

149.  Telephone  contract  dominated  by  Minneapolis  and  St.  Paul. 

business  interests — New  Orleans.  155.  Telephones  in  a  city  of  15,000 — Ann 

150.  Monopoly  under  Federal  laws—  Arbor,  Michigan. 

Washington.  156.  Important  points  in  a  telephone 

franchise. 

145.  Public  control  —  Massachusetts. — By  a  law  passed  in 

1906,  Massachusetts  brought  telephone  companies  within 
that  commonwealth  under  the  supervision  of  the  State  High¬ 
way  Commission.1  By  this  act  the  jurisdiction  of  the  com¬ 
mission  was  extended  over  “  all  companies  engaged  in  the 
transmission  of  intelligence  by  electricity  The  commis¬ 
sioners  were  prohibited  from  accepting  employment  from  any 
of  these  companies,  from  owning  any  stock  in  them,  from 
being  in  any  way  pecuniarily  interested  in  the  manufacture 
or  sale  of  any  article  or  commodity  used  by  them,  or  from 
being  connected  with  or  in  the  employ  of  any  person,  partner¬ 
ship  or  corporation  which  finances  any  such  company.  Un¬ 
der  this  law,  whenever  a  complaint  in  writing  relative  to  the 
service  or  charges  of  any  company  is  filed  by  any  city  or 
town  in  the  state,  signed  by  the  proper  officers  or  by  20 
customers  of  the  company,  the  commission  is  required  to 
give  a  public  hearing  and  to  make  such  recommendation 
concerning  reduction  or  modification  of  charges  or  improve¬ 
ments  in  the  quality  of  service  as  it  may  see  fit.  The  com¬ 
mission,  however,  has  no  authority  to  compel  the  acceptance 
of  its  recommendations.  Every  company  is  required  to  file 


1  Acts  of  1906,  chapter  433. 

252 


t 


TELEPHONE  FRANCHISE  REGULATIONS.  253 

annually  a  report  in  such  form  and  detail  as  may  be  pre¬ 
scribed  by  the  commission;  also  to  furnish  the  commission, 
upon  request,  any  information  concerning  the  condition, 
management  and  operation  of  its  business  or  concerning  its 
rates  or  facilities,  as  may  be  required.  The  companies  have 
to  keep  books  and  accounts  covering  the  business  done  within 
the  commonwealth,  in  a  form  approved  by  the  commission. 

Any  company  incorporated  for  the  transmission  of  intel¬ 
ligence  by  electricity,  or  by  telephone  whether  by  electricity 
or  otherwise,  or  for  the  transmission  of  electricity  for  light¬ 
ing,  heating  or  power,  except  for  street  railway  purposes,  is 
authorized  to  construct  its  lines  along  the  public  highways  of 
the  state.1  It  is  required,  however,  not  to  incommode  the 
public  use  of  the  streets.  In  any  city  or  town  through  which 
the  company  desires  to  pass,  the  local  authorities  are  required 
to  give  the  company  “  a  writing  specifying  where  the  poles 
may  be  located,  the  kind  of  poles,  the  height  at  which,  and 
the  poles  where,  the  wires  may  be  run  ”.  Before  these  loca¬ 
tions  are  fixed,  notices  must  be  served  upon  the  real  estate 
owners  along  the  streets  which  the  company  proposes  to  use, 
and  a  public  hearing  must  be  held.  At  any  time  after  the 
company’s  lines  have  been  erected,  the  local  authorities,  after 
giving  the  company  a  hearing,  or  on  petition  of  the  com¬ 
pany  without  a  hearing,  may  order  any  change  in  the  location 
or  erection  of  the  poles  or  in  the  height  of  the  wires.  Abut¬ 
ting  land  owners  whose  property  is  “  injuriously  affected  or 
diminished  in  value  by  occupation  of  the  ground  or  of  the 
air,  or  otherwise  ”,  by  the  construction,  erection  or  altera¬ 
tion  of  a  company’s  lines,  whether  the  fee  in  the  streets  be¬ 
longs  to  them  or  not,  may  within  three  months  apply  to  the 
local  authorities  for  an  appraisal  of  damages.  This  ap¬ 
praisal  is  made  by  the  mayor  and  aldermen  in  cities  and  by 
the  selectmen  in  towns.  A  property  owner  may  appeal  from 
this  appraisal  to  a  jury.  If  the  jury  increases  the  amount 
of  damages,  costs  are  assessed  against  the  company;  other¬ 
wise,  against  the  property  owner. 

A  telephone  company  is  not  permitted  to  commence  the 
construction  of  its  line  until  three-fourths  of  its  capital  stock 
has  been  unconditionally  subscribed  and  at  least  one-half  has 
been  paid  in  in  cash.  No  telephone  company  is  permitted 

1  Revised  Laws,  chapter  122,  as  amended  by  acts  of  1906,  chapter  117. 


» 


254  MUNICIPAL  FRANCHISES. 

at  any  time  to  contract  or  owe  debts  to  a  larger  amount  than 
one-half  of  its  capital  stock  actually  paid  in.  Any  person  or 
corporation  operating  a  telephone  exchange  in  Massachusetts 
is  required,  upon  application  from  a  telegraph  company,  to 
supply  telephone  service  to  the  latter  without  discrimination 
as  to  connections,  service,  use  of  instruments  or  rates.  When¬ 
ever  any  individual  or  corporation  applies  to  a  telephone 
company  for  service  and  tenders  the  customary  rental  for  the 
class  of  service  required,  the  service  must  be  furnished  with¬ 
out  discrimination,  if  the  applicant  has  secured  the  rights 
necessary  to  make  the  connections  applied  for  and  pays  the 
company  in  advance  an  amount  sufficient  to  cover  the  actual 
cost  of  the  extension  if  the  extension  is  more  than  one-half 
mile  from  any  of  the  company’s  main  exchange  circuits. 
Companies  are  required,  wherever  they  operate  lines  of  wires 
over  or  under  streets  or  buildings,  to  use  only  proper  wires, 
safely  attached  to  strong  and  sufficient  supports  and  insu¬ 
lated  at  all  points  of  attachment.  Abandoned  wires  must  be 
removed.  Every  wire  entering  a  building  must  be  properly 
insulated,  and  there  must  be  attached  to  it,  near  the  place 
of  entering  the  building  and  at  a  point  so  situated  as  to  avoid 
danger  from  fire,  “  an  appliance  adapted  at  all  times  to  pre¬ 
vent  a  current  of  electricity  of  such  intensity  or  volume  as  to 
be  capable  of  injuring  electrical  instruments  or  of  causing 
fire,  from  entering  the  building  by  means  of  such  wire  In 
cities  the  owners  of  telephone  wires  and  cables  are  required 
to  affix,  at  the  points  of  support,  a  tag  or  mark  distinctly 
designating  the  owner  or  user.  In  towns,  when  wires  be¬ 
longing  to  different  owners  are  carried  on  the  same  poles,  the 
poles  must  be  marked  with  the  initials  of  the  owners  and  the 
wires  must  be  tagged,  at  or  near  the  points  of  attachment, 
with  the  names  or  initials  of  their  owners. 

Any  person  desiring  to  cut,  disconnect  or  remove  tele¬ 
phone  wires  in  order  to  move  a  building  or  for  any  other 
necessary  purpose,  may  do  so,  “  exercising  reasonable  care  ”, 
if  he  has  given  written  notice  to  the  company  24  hours  in 
advance. 

Early  in  1907  the  Highway  Commission  undertook  an  in¬ 
vestigation  into  the  rates  and  service  of  the  Hew  England 
Telephone  and  Telegraph  Company,  which  is  the  principal 
Bell  Company  operating  in  Massachusetts  and  the  northern 


TELEPHONE  FRANCHISE  REGULATIONS. 


255 


New  England  states.  The  commission  found  that  the  com¬ 
pany  had  been  engaged  in  certain  illegal  practices,  “  inas¬ 
much  as  men  were  employed,  at  the  request  of  public  officials, 
some  of  whom  did  not  necessarily  perform  a  full  day’s  work 
for  a  day’s  pay,  and  some  of  whom  rendered  no  service  what¬ 
ever  for  the  wages  received  ”.1  The  commission  also  found 
that  the  company  furnished  “  frank  books  and  free  telephones 
to  certain  persons  Commenting  upon  this  fact,  the  com¬ 
mission  said: 

“  The  greater  part  of  these  were  proper  favors,  or  were  necessary  in 
the  maintenance  of  the  physical  plant  of  the  company  or  in  conducting 
the  business ;  but  a  few  of  them  were  furnished  to  persons  under  such 
circumstance  as  indicated  a  possible  wrong  motive  on  the  part  of  both 
the  company  and  the  recipient  of  the  favor.” 

On  September  18,  1907,  without  waiting  to  complete  the 
investigation  relative  to  rates  and  service,  the  commission 
addressed  a  letter  to  the  president  of  the  company,  calling  at¬ 
tention  to  these  practices  and  making  the  following  recom¬ 
mendations  : 2 

“  First. — The  discontinuance  of  the  practice  of  furnishing  frank 
books  except  to  officers  and  employes  of  the  New  England  Telephone 
and  Telegraph  Company,  and  to  officers  of  other  telephone  companies. 

“  Second. — The  discontinuance  of  the  practice  of  furnishing  free 
telephones  except:  (a)  to  officers  and  employes  of  the  company,  (b)  to 
charitable  institutions,  (c)  such  as  may  be  from  time  to  time  necessary 
for  the  maintenance  of  the  plant  of  the  company,  and  (d)  such  as  may 
from  time  to  time  be  necessary  for  the  accommodation  of  telephone 
subscribers. 

“  Third. — That  quarterly  reports  to  the  commission  be  made  by  the 
company,  containing  the  names  of  all  persons  to  whom  frank  books  or 
free  telephones  have  been  furnished,  said  reports  to  be  open  to  public 
inspection  in  the  office  of  the  commission. 

“Fourth. — The  adoption  of  the  same  merit  system  in  the  selection 
of  the  employes  of  the  company  in  the  underground  construction  or 
street  work  as  apparently  obtains  in  other  departments  of  the  company, 
and  the  consequent  permanent  discontinuance  of  the  employment  of 
men  through  political  influence,  or  who  do  not  render  an  equivalent 
for  the  wages  which  they  receive. 

“Fifth. — The  readjustment  of  all  discounts  to  municipalities  to  a 
uniform  basis.” 

In  his  reply  to  the  commission,  the  company’s  president 
undertook  to  carry  out  all  these  recommendations. 

The  commission  also  found  that  at  various  times  subscrip¬ 
tions  had  been  made  by  the  telephone  company  for  charita¬ 
ble  and  campaign  purposes. 

1  Fifteenth  Annual  Report  of  the  Massachusetts  Highway  Commission,  1908. 
p.  138. 

a  Report,  1908,  op.  cit.,  p.  140. 


256 


MUNICIPAL  FRANCHISES. 


“  A  subscription  by  the  officers  of  a  corporation  for  any  cause,  how¬ 
ever  meritorious  it  may  be,  is  probably  not  a  legal  act  ”,  comments  the 
commission.1  “It  may  be  that  the  cause  is  of  such  merit  that  the 
stockholders,  subscribers  and  general  public  will  approve  of  it;  but 
chapter  581  of  the  Acts  of  1907  prohibits  a  telephone  or  telegraph  com¬ 
pany  from  paying  or  contributing  in  order  to  aid,  promote  or  prevent 
the  nomination  or  election  of  any  person  to  public  office,  or  in  order  to 
aid,  promote  or  antagonize  the  interests  of  any  political  party,  or  to 
influence  or  affect  the  vote  on  any  question  submitted  to  the  voters. 
It  is  the  clear  duty  of  a  Board  charged  with  ‘  keeping  itself  informed 
as  to  the  compliance  of  all  telephone  and  telegraph  companies  with  the 
provisions  of  law  ’  to  make  sure  that  this  law  is  respected.  The  law 
will  doubtless  be  observed  by  the  officers  of  the  different  companies 
without  the  intervention  of  the  commission.” 

Although  local  franchises,  strictly  so-called,  are  not  re¬ 
quired  for  the  operation  of  telephone  lines  in  Massachusetts, 
it  may  be  of  interest  to  note  the  provisions  of  the  Spring- 
field  ordinance-  relating  to  the  lines,  conduits  and  distribu¬ 
ting  poles  of  telephone  companies.2  Under  this  ordinance 
the  mayor  and  aldermen,  the  latter  constituting  the  upper 
branch  of  the  city  council,  are  given  power  to  authorize  any 
telephone  company  to  construct  underground  conduits  and 
maintain  cables  and  wires  in  them,  with  distributing  poles  at 
the  termini  of  the  conduits.  The  usual  provisions  are  made 
for  restoring  the  surface  of  streets  disturbed  and  for  the  pro¬ 
tection  of  gas  pipes,  water  pipes,  sewers,  etc.  It  is  provided 
that  the  conduits,  once  laid,  may  not  be  removed  with¬ 
out  permission  of  the  aldermen,  but  must  be  removed  to 
other  suitable  locations  whenever  that  is  required  by  the 
aldermen.  No  permit  for  disturbing  the  surface  of  any 
street  is  to  be  valid  until  the  company  has  executed  an  agree¬ 
ment,  in  form  approved  by  the  mayor,  binding  the  company 
to  the  fulfilment  of  certain  conditions.  Space  in  every  con¬ 
duit  must  be  reserved  and  maintained,  free  of  charge,  for  the 
use  of  the  fire,  police  and  other  signal  wires  belonging  to  the 
city  and  used  exclusively  for  municipal  purposes.  The  com¬ 
pany  must  indemnify  the  city  against  all  damages  and  ex¬ 
pense  resulting  from  the  company’s  acts  or  arising  in  any 
manner  from  the  exercise  of  its  privileges  granted  by  the  city. 
The  company  must  also  execute  a  bond  of  not  less  than 
$10,000  before  disturbing  any  street  for  the  purpose  of  lay- 
in  wires  or  conduits,  this  bond  to  be  conditioned  upon  the 
fulfilment  of  all  the  company’s  agreements  with  the  city  and 

1  Report,  1908,  op.  cit„  p.  142. 

*  Springfield  Revised  Ordinances,  chapter  46,  p.  219. 


TELEPHONE  FRANCHISE  REGULATIONS. 


257 


its  duties  under  the  ordinance.  The  company  must  remove 
all  wires  from  any  conduit  when  the  license  to  use  it  has  been 
revoked  by  the  mayor  and  aldermen,  and  must  at  once  com¬ 
ply  with  any  changes  in  the  conduits,  man-holes  or  poles, 
ordered  by  the  mayor  and  aldermen  after  a  duly  appointed 
hearing.  The  ordinance  provides  that  any  authority  granted 
by  the  mayor  and  aldermen  “  may,  after  notice  and  hearing, 
be  revoked  or  altered  at  any  time  without  liability  on  the 
part  of  the  city  therefor;  but  in  case  any  location  in  any 
street  shall  be  revoked,  a  substitute  location  in  some  other 
street,  that  will,  in  the  opinion  of  the  said  board,  accom¬ 
modate  the  service,  shall  be  granted  ”. 

Apparently,  the  indeterminate  franchise,  which  applies  to 
street  railways  in  Massachusetts,  is  not  wholly  applicable, 
under  the  laws  of  the  state,  to  the  grants  of  locations  for 
telephone  companies.  It  is  true  that  particular  locations 
may  be  changed ;  but  there  seems  to  be  no  power  in  the  local 
authorities  to  revoke  any  such  locations  without  granting 
substitute  locations.  In  1904  Dr.  Julius  Garst,  representing 
the  city  of  Worcester  in  the  State  House  of  Representatives, 
introduced  a  bill  providing  that  telephone  franchises  might 
be  granted  by  any  city  by  a  two-thirds  vote  of  the  city  coun¬ 
cil  approved  by  the  mayor.1  Franchises  in  towns  were  to  be 
granted  by  the  selectmen.  The  local  authorities  were  author¬ 
ized  to  fix  the  terms  upon  which  such  franchises  should  be 
given.  It  was  provided  that  a  city  or  town  might  sell  such 
a  franchise  “upon  such  terms  and  conditions  as  it  shall  pre¬ 
scribe,  at  public  sale,  to  any  responsible  person  or  corpora¬ 
tion  agreeing  to  pay  to  the  city  or  town  the  highest  per¬ 
centage  upon  its  gross  receipts,  or  agreeing  to  render  serv¬ 
ice  at  the  lowest  rates  It  was  specifically  provided  that  no 
new  public  telephone  lines  should  thereafter  be  constructed, 
maintained  or  operated,  without  a  franchise  from  the  local 
authorities.  Any  such  franchise  was  to  be  subject  to  the 
optional  referendum  upon  petition,  within  60  days  after  its 
passage,  of  five  per  cent  of  the  qualified  voters  of  the  locality. 
Every  franchise  was  to  be  granted  for  a  specified  period  not 
exceeding  20  years,  and  all  franchises  in  force  at  the  time  of 
the  passage  of  the  act  were  to  become  void  on  July  1,  1924, 
if  not  sooner  revoked.  Every  company,  whether  exercising 

1  House  Bill  No.  1265. 


258 


MUNICIPAL  FRANCHISES. 


a  new  or  an  old  franchise,  was  to  keep  such  accounts  and  make 
such  annual  reports  as  to  sums  expended  by  it  for  construction 
or  otherwise,  as  should  be  satisfactory  to  the  local  authorities. 
In  case  of  any  substantial  violation  of  the  terms  of  a  fran¬ 
chise,  the  Supreme  Court  was  authorized  to  forfeit  the  grant 
on  petition  of  the  local  authorities.  At  the  expiration  of  the 
period  of  any  grant,  the  city  or  town  might  renew  it  for  an¬ 
other  period  of  20  years  or  might  give  a  franchise  to  a  new 
company.  In  the  latter  case,  the  new  company  was  required 
to  purchase  the  old  company’s  plant  at  a  price  based  on  the 
cost  of  duplication,  less  depreciation,  plus  a  fair  allowance 
not  exceeding  10  per  cent  for  the  value  of  the  plant  as  a 
going  concern.  Whenever  a  city  or  town  should  grant  a 
telephone  franchise,  any  company  operating  a  line  in  an  ad¬ 
joining  city  or  town  was  required  to  supply  connecting  serv¬ 
ice  upon  terms  to  be  fixed  by  agreement  or  arbitration.  This 
proposed  law,  except  so  far  as  it  related  to  the  keeping  of 
accounts  and  the  rendering  of  reports,  was  not  to  apply  to 
any  company  whose  net  earnings  had  not  averaged  4  per 
cent  per  annum  on  its  capital  stock  prior  to  the  passage  of 
the  act.  This  measure  was  not  passed;  but  it  is  indicative  of 
a  certain  amount  of  dissatisfaction,  which  exists  in  Mass¬ 
achusetts,  with  indeterminate  and  perpetual  franchises. 

146.  Monopoly  without  conditions  —  New  York  City.  — 
The  telephone  business  of  Greater  New  York  is  divided  be¬ 
tween  two  companies,  both  of  which  are  subsidiaries  of  the 
American  Telephone  and  Telegraph  Company.  These  two 
companies,  however,  cooperate  in  rendering  service,  and  in 
fact  publish  only  one  telephone  directory.  In  old  New  York, 
that  is  to  say,  in  the  Boroughs  of  Manhattan  and  the  Bronx, 
the  New  York  Telephone  Company,  successor  of  the  old 
Metropolitan  Telephone  and  Telegraph  Company,  enjoys  a 
monopoly.  In  the  Boroughs  of  Brooklyn,  Queens  and  Rich¬ 
mond,  the  New  York  and  New  Jersey  Telephone  Company 
has  a  monopoly.  These  companies  are  operating  under  the 
general  laws  of  the  state.  Strictly  speaking,  they  have  no 
local  franchises.  However,  the  Metropolitan  Telephone  and 
Telegraph  Company,  the  predecessor  of  the  New  York  Tele¬ 
phone  Company,  obtained,  on  December  13,  1881,  from  the 
common  council  of  the  City  of  New  York,  permission  to  use 
the  streets  “  for  the  purpose  of  constructing  and  laying  lines 


TELEPHONE  FRANCHISE  REGULATIONS. 


259 


of  electrical  conductors  underground,  from  time  to  time,  in 
tubes  or  otherwise,  and  for  constructing,  maintaining  and 
using  in  such  streets,  from  time  to  time,  upon,  above  or  be¬ 
low  the  surface  of  the  ground,  boxes,  vaults,  or  other  fixtures 
suitable  for  distributing  and  testing,  from  time  to  time,  the 
wires  and  insulators  of  said  lines,  and  for  access  thereto  ’V 
The  only  conditions  attached  to  this  resolution  were  first, 
that  excavations  in  the  streets  and  the  removal  and  replace¬ 
ment  of  pavements  or  sidewalks  should  be  done  under  the 
direction  of  the  commissioner  of  public  works;  second,  that 
one  wire  in  each  route  should  be  reserved  for  the  use  of  the 
police  and  another  for  the  fire  alarm  telegraph,  without  charge 
to  the  city,  and  third,  that  the  company  should  pay  one  cent 
per  lineal  foot  of  streets  opened  by  it  for  the  purpose  of  lay¬ 
ing  its  conductors.  This  resolution  was  passed  over  the  veto 
of  Mayor  Grace.  In  his  veto  message,  dated  November  29, 
1881,  the  Mayor  said: 2 

“  The  resolution  fails  to  make  any  provision  for  the  payment  to  the 
city  of  an  adequate  consideration  for  the  franchises  sought  to  be  granted. 
The  approval  of  this  resolution  by  me  would  be  equivalent  to  the  be¬ 
stowal  upon  the  Metropolitan  Telephone  and  Telegraph  Company  of  a 
right  which  is  of  great  value  to  them,  and  which  should  be  of  great 
value  to  the  city,  while  the  city  itself  w'ould  reap  practically  no  return 
for  the  proprietary  rights  of  which  it  would  dispose. 

“  The  Metropolitan  Telephone  and  Telegraph  Company,  which  is  a 
wealthy  corporation,  already  possessed  of  most  valuable  rights,  should 
be  compelled  to  pay  the  city  an  honest  price  before  it  is  permitted  to 
add  to  the  franchises  it  already  enjoys.  ****** 

“  Not  only  should  this  practice  of  granting  franchises  without  com¬ 
pensation  come  to  an  end  because  of  its  inherent  wrongfulness,  but 
because  if  the  burden  of  taxation  is  ever  to  be  materially  reduced,  the 
city  must  avail  itself  of  all  possible  sources  of  income.  Capital  is  en¬ 
titled  to  a  fair  return  for  its  use;  but  if  the  municipality  is  enabled  to 
afford  the  opportunity  to  capital  for  reaping  unusual  returns  far  above 
the  market  rate  of  interest,  the  city  which  thus  affords  the  opportunity 
should  share  in  the  benefit.” 

The  Mayor  also  called  attention  to  the  fact  that  under  the 
resolution  the  company  would  not  be  subject  to  the  general 
provisions  of  the  revised  ordinances  relative  to  wires. 

“  The  passage  of  your  resolution  ”,  said  he,  “  would  practically  place 
the  streets  of  the  city  at  the  mercy  of  the  Metropolitan  Telephone  and 
Telegraph  Company,  free  from  all  the  provisions  of  Article  41  of  the 
Revised  Ordinances,  which  are  most  wholesome,  except  the  one  concern¬ 
ing  the  reservation  of  wires  for  the  use  of  the  police  and  fire  departments, 
while  such  wires  could  supply  no  existing  need  of  either  of  these  de- 

1  Proceedings  of  the  Board  of  Aldermen,  vol.  164,  p.  881. 

*  Ibid.,  p.  734. 


260 


MUNICIPAL  FRANCHISES. 


partments,  inasmuch  as  they  are  already  sufficiently  provided  with  wires 
for  their  respective  purposes.  The  article  of  the  ordinances  referred  to 
provides  for  the  protection  of  water  and  gas  pipes,  sewers  and  drains, 
from  exposure,  prohibits  the  laying  of  wires  more  than  four  feet  distant 
from  the  curb-stone ;  directs  that  all  work  shall  be  done  so  as  not  to 
materially  impede  traffic  or  passage,  and  that  in  no  case  shall  passage 
be  interrupted  for  a  longer  period  than  an  hour;  provides  that  the  space 
selected  for  laying  the  wires  shall  not  exceed  two  feet  in  width,  and  two 
feet  in  depth,  and  contains  other  salutary  regulations,  to  the  rigorous 
observance  of  which  this  company  should  be  held,  instead  of  being 
granted  practical  exemption  from  its  requirements.” 

Furthermore,  the  Mayor  said  that  inasmuch  as  the  com¬ 
pany  was  only  one  of  a  large  number  using  electrical  wires 
for  telegraphic  and  telephonic  purposes  in  the  city,  it  was 
unfair  to  give  this  one  company  the  right  to  occupy  under¬ 
ground  space  for  its  conduits,  when  it  would  be  impossible, 
on  account  of  the  crowded  condition  underneath  many  of  the 
streets,  to  grant  a  similar  privilege  to  the  other  companies. 
He  thought  this  grant  “  might  work  a  practical  exclusion  of 
all  other  companies  from  the  streets  ”. 

A  few  years  later  legislation  was  enacted  by  the  state  of 
Hew  York,  requiring  all  overhead  wires  on  the  Island  of 
Manhattan,  with  unimportant  exceptions,  to  be  placed  under¬ 
ground.  A  board  of  electrical  control  was  established  for  the 
purpose  of  devising  and  carrying  out  a  plan  of  underground 
conduits  for  the  accommodation  of  all  these  wires.  This 
board  entered  into  a  contract  with  a  private  company  for  the 
construction  of  electrical  subways.  In  1890  a  new  company 
was  organized  to  take  over  that  portion  of  the  conduits  used 
for  low  tension  wires.  This  new  company,  the  Empire  City 
Subway  Company,  Limited,  still  controls  all  the  conduits  in 
Manhattan  used  by  telephone  and  telegraph  companies.  The 
company  is  itself  controlled,  through  stock  ownership,  by  the 
New  York  Telephone  Company.  The  monopoly  of  the  tele¬ 
phone  service  is,  therefore,  doubly  strengthened.  All  tele¬ 
phone  wires  must  be  placed  underground  in  the  conduits  owned 
by  the  Empire  City  Subway  Company;  and  this  company  is 
controlled  by  the  powerful  New  York  Telephone  Company,  a 
licensee  of  the  American  Telephone  and  Telegraph  Company. 

In  1904  the  Merchants’  Association  of  New  York  under¬ 
took  an  investigation  of  the  rates  charged  by  this  company. 
The  Audit  Company  of  New  York,  which  was  given  unre¬ 
stricted  access  to  the  company’s  books  and  accounts  under  an 


TELEPHONE  FRANCHISE  REGULATIONS. 


261 


agreement  between  the  Association  and  the  company,  re¬ 
ported,  as  a  result  of  its  examination,  that  for  the  16  years 
prior  to  December  31,  1904,  the  net  earnings  of  the  New 
York  Telephone  Company  and  its  predecessor  had  averaged 
11.12  per  cent  per  annum  on  investment,  and  that  for  the 
year  1904  the  company’s  net  earnings  had  been  14.64  per 
cent.1  The  Audit  Company  did  not  report  the  amount  of 
the  company’s  investment,  but  stated  that  telephone  property, 
real  estate,  cash,  supplies,  subway  securities  (stocks  and 
bonds  of  the  Empire  City  Subway  Company),  and  accounts 
and  bills  receivable,  had  been  included  in  investment.  At 
the  solicitation  of  the  Merchants’  Association  and  under  pres¬ 
sure  of  a  threatened  legislative  investigation,  the  company 
made  a  considerable  reduction  in  its  rates.  The  Merchants’ 
Association  made  a  report  to  the  Board  of  Estimate  and  Ap¬ 
portionment,  strongly  commending  the  service  rendered  by 
the  New  York  Telephone  Company  and  just  as  strongly  con¬ 
demning  the  proposition  to  introduce  competition  by  giving 
a  franchise  to  an  independent  company.  The  Association’s 
committee  stated  that,  in  its  opinion,  “  to  provide  a  fair  re¬ 
turn  on  capital  actually  and  necessarily  invested,  and  a 
proper  allowance  for  contingencies,  10  per  cent  margin  above 
operating  outlays  is  a  reasonable  and  proper  margin  in  the 
telephone  business  ”.2  It  was  stated  that  the  company  had 
acceded  to  this  conclusion  and  had  agreed  that  its  rates  should 
be  so  adjusted  as  to  produce  a  net  revenue  of  approximately 
10  per  cent  on  actual  investment.  The  Association’s  com¬ 
mittee,  while  contending  that  telephone  companies,  along 
with  other  public  service  corporations,  should  be  subject  to 
regulation  by  law,  in  case  the  necessity  arises,  suggested 
that  “  such  regulation  should  be  resorted  to  only  when  the 
unreasonableness  and  arrogant  attitude  of  a  corporation  and 
its  refusal  to  justify  its  rates  leaves  no  alternative  ”.3  So  far 
as  the  New  York  Telephone  Company  was  concerned,  the 
committee  was  all  equanimity.  After  stating  that  the  com¬ 
pany  had  now  adjusted  its  rates  so  as  to  bring  its  net  revenues 
down  approximately  to  the  10  per  cent  basis,  the  committee 
said : 4 

“  It  has  likewise  been  shown  that  in  the  past  the  rates  of  that  company 
have  been  voluntarily  adjusted  and  reduced  at  moderate  intervals,  so  as 

1  “  Inquiry  into  Telephone  Service  and  Rates,”  etc.,  op.  cit p.  19. 

2  Ibid.,  p.  17.  8  Ibid.,  p.  87.  *  Ibid.,  p.  88. 


MUNICIPAL  FRANCHISES. 


to  have  maintained  a  reasonable  rate  of  earnings  during  the  past  sixteen 
years ;  that  the  public  have  been  the  beneficiaries  of  these  voluntary 
reductions  made  possible  by  a  graded  system  of  charges  based  upon 
sound  business  principles;  and,  further,  that  these  reductions  would 
have  been  unlikely  and  probably  impossible  had  legislation  arbitrarily 
intervened  to  force  a  continuance  of  the  fallacious  system  of  flat  rates.” 

In  regard  to  the  efficiency  of  the  New  York  Telephone 
Company’s  service,  the  committee  quoted  from  Mr.  John 
Hesketh,  a  special  representative  of  the  Postmaster-General 
of  Australia,  who  had  made  an  expert  study  into  the  relative 
efficiency  of  the  telephone  systems  of  the  most  important 
cities  of  America  and  Europe.  In  answer  to  the  question  as 
to  what  telephone  system,  among  all  that  he  had  seen,  he 
regarded  as  most  complete,  Mr.  Hesketh  was  reported  as  say- 
ing:1 

“  Without  any  question,  that  of  New  York.  The  New  York  tele¬ 
phone  system  is  the  finest  example  of  thorough  telephone  engineering 
I  have  seen.  All  the  exchanges  are  equipped  in  a  uniform  manner,  all 
are  in  fire-proof  buildings  designed  specially  for  telephone  purposes, 
the  cable  distribution  is,  for  the  greater  part  of  the  city,  so  carried  out 
that  the  lines  are  in  lead-covered  cables  practically  the  entire  distance 
between  the  exchanges  and  the  subscribers’  premises,  and  the  service  is 
in  all  respects  at  the  very  highest  point  of  efficiency.  *  *  *  The 
New  York  system  is  by  far  the  largest  telephone  system  in  the  world, 
and  is  undoubtedly  in  all  respects  the  best  equipped.” 

147.  Stringent  conditions  proposed  for  a  competing  com¬ 
pany —  New  York  City. — On  June  1,  1905,  the  Atlantic 
Telephone  Company  made  application  to  the  board  of  esti¬ 
mate  and  apportionment  for  a  franchise  to  cover  the  whole 
of  Greater  New  York  for  the  operation  of  telephone,  tele¬ 
graph  and  telautograph  lines.  This  application,  together 
with  the  applications  of  certain  other  companies,  was  referred 
to  Mr.  Harry  P.  Nichols,  in  charge  of  the  division  of  fran¬ 
chises,  which  at  that  time  was  a  part  of  the  city  comptroller’s 
office,  for  a  report.  During  the  pendency  of  these  applica¬ 
tions,  Mr.  Nichols  made  four  reports,  three  upon  the  ap¬ 
plication  of  the  Atlantic  Telephone  Company  and  one  upon 
the  results  of  a  special  investigation  into  the  operation  of  a 
dual  system  of  telephones  in  various  cities.  In  his  first  re¬ 
port,  dated  October  12,  1905,  Mr.  Nichols,  in  discussing  the 
value  of  the  proposed  franchise  to  the  Atlantic  Telephone 
Company,  said : 2 

1  “  Inquiry  into  Telephone  Service  and  Rates,”  etc..,  op.  cit ,  p.  48. 

2  Report  of  the  Bureau  of  Franchises,  upon  the  application  of  the  Atlantic 
Telephone  Company,  p.  22. 


TELEPHONE  FRANCHISE  REGULATIONS. 


263 


“Weight  should  not  be  given  to  the  fact  that  the  New  York  Tele¬ 
phone  Company  pays  nothing  for  the  invaluable  privileges  which  it 
enjoys,  nor  to  the  consideration  that  the  applicant  is  to  operate  in  op¬ 
position  to  the  present  monopoly  for  the  purposes  of  cheaper  and  better 
service,  and  therefore  will  not  wish  to  be  burdened  by  terms  more 
onerous  than  those  imposed  on  the  existing  company.  The  failure  to 
exact  adequate  compensation  for  the  grant  of  public  privileges  in  the 
past,  is  no  recommendation  for  similar  procedure  at  present.” 

Accordingly,  lie  proposed  that  the  company  should  be  re¬ 
quired  to  make  a  cash  payment  of  $250,000  upon  the  ac¬ 
ceptance  of  its  grant,  and  annual  payments  according  to  a 
graduated  scale  of  percentages  on  its  gross  receipts,  increas¬ 
ing  from  5  per  cent  annually  during  the  first  5  years  to 
10  per  cent  during  the  last  5  years  of  the  proposed  25-year 
grant,  with  minimum  payments  ranging  from  $200,000  to 
$400,000  per  year.  The  minimum  payments  proposed  would 
aggregate,  during  the  full  term  of  25  years,  the  sum  of 
$7,750,000.  This  compensation  was  to  he  in  addition  to  the 
furnishing  of  free  telephone  service  for  all  city  departments. 
This  service,  Mr.  Nichols  said,  had  cost  the  city  during  the 
year  1904  more  than  $200,000. 

After  further  negotiations  with  the  applicant  company 
and  more  extended  investigation,  Mr.  Nichols  made  a  second 
report,  under  date  of  April  24,  1906,  accompanied  by  a  form 
of  contract  in  which  certain  concessions  had  been  made  to 
the  company,  involving  a  considerable  decrease  in  the  com¬ 
pensation  required  and  an  extension  of  the  privileges  of  the 
grant  to  include  a  right  of  renewal  for  a  second  period  of 
25  years.  The  company  had  asked  to  have  the  initial  pay¬ 
ment  of  $250,000  reduced  to  $100,000.  Mr.  Nichols  re¬ 
fused  to  make  this  concession.  In  explanation  of  his  position 
in  this  matter,  he  said : 1 

“  Franchises  have  heretofore  been  obtained  which  have  never  been 
utilized,  and  in  consequence  conveniences  and  improvements  for  the 
benefit  of  the  people,  expected  from  the  grants,  have  never  materialized, 
though  the  rights  so  given  have  many  times  been  sold,  leased  or  other¬ 
wise  disposed  of  to  some  competitor  presumably  at  a  large  profit  to  the 
holder,  and  have  been  held  by  such  purchaser  to  prevent  their  use.  This 
has  stifled  competition  and  thus  created  monopolies  in  many  public  utili¬ 
ties.  In  consequence  I  believe  that  the  city  should  receive  a  substan¬ 
tial  initial  payment,  large  enough  to  act  as  a  powerful  incentive  to  the 
carrying  out  of  the  terms  of  the  contract  and  to  discourage  speculation 
in  franchises  so  obtained.  Certainly  $250,  000  is  not  too  great  a  sum  to 
ask  the  company  to  pay  in  order  to  show  its  good  faith  and  intention 
to  utilize  the  great  privilege  it  asks.” 

1  Second  Report  of  the  Bureau  of  Franchises  upon  the  application  of  the 
Atlantic  Telephone  Company,  p.  9. 


264 


MUNICIPAL  FRANCHISES. 


In  his  second  report  he  also  suggested  that  a  provision 
should  be  inserted  in  the  franchise,  giving  the  board  of  esti¬ 
mate  and  apportionment  control  over  the  capitalization  of 
the  company.  To  this  suggestion  the  company’s  representa¬ 
tives  were  seriously  opposed,  claiming  that  inasmuch  as  the 
city  authorities  were  to  have  the  right  to  regulate  rates,  the 
city  would  be  in  a  position  absolutely  to  prevent  the  water¬ 
ing  of  stock.  With  this  position  Mr.  Nichols  could  not  agree. 
He  urged  that  if  the  capital  stock  and  bonded  debt  of  the 
company  should  become  many  times  the  actual  value  of  its 
property  and  therefore  require  the  payment  of  excessive  fixed 
charges,  the  company’s  service  would  be  likely  to  become  in¬ 
efficient  because  of  lack  of  funds,  unless  the  rates  charged 
were  exorbitant. 

“If  under  these  circumstances  an  effort  were  made  to  reduce  the  rate 
of  telephone  service”,  said  he,1  “the  board  of  estimate  and  apportion¬ 
ment  perhaps  would  not  consider  it  ‘  reasonable  and  fair  ’  if,  by  reducing 
such  cost,  the  result  would  be  that  no  profits  would  remain  for  the 
shareholders.  A  decision  at  such  time  would,  unless  public  opinion 
demanded  it,  cause  criticism  and  perhaps  litigation.  At  any  rate  the 
board  would  be  put  in  the  position  of  dealing  harshly  with  the  stock¬ 
holders  who  had  invested  their  money  in  the  enterprise  and  deciding 
favorably  for  the  consumer,  or  of  dealing  fairly  with  the  stockholder 
and  deciding  unfavorably  for  the  consumer.  *  *  *  * 

“Nearly  all  the  complaints  against  public  service  corporations  are 
traceable  to  over-capitalization.  *  *  *  * 

“These  two  conditions,  one  giving  the  city  the  power  to  fix  rates,  the 
other  restricting  the  capitalization  and  bonded  indebtedness,  are  each 
dependent  upon  the  other,  and  both  are  required  to  protect  the  citizens 
of  the  city  as  a  consumer  of  the  product.  One  is  necessary  to  protect 
it  from  unfair  charges,  and  the  other  is  necessary  to  prevent  a  condition 
of  affairs  which  experience  shows  may  delay  action  fixing  just  charges, 
and,  in  the  event  of  reducing  charges,  to  prevent  confiscation  of  capital 
invested  in  stocks  or  bonds  which  have  no  real  value.” 

During  the  summer  of  1906,  employes  of  the  bureau  of 
franchises  visited  36  cities  of  the  United  States  for  the  pur¬ 
pose  of  obtaining  information  relative  to  the  Bell  and  Inde¬ 
pendent  telephone  companies  and  their  growth.  In  Mr. 
Nichols’  third  report  to  the  board  of  estimate  and  apportion¬ 
ment,  dated  November  21,  1906,  he  gives  the  results  of  this 
investigation,  with  a  general  discussion  of  the  subject  of  com¬ 
petition  in  the  telephone  business.  In  this  report  he  calls  at¬ 
tention  to  the  fact  that  the  Independent  companies  almost 
invariably  charge  for  service  on  the  flat  rate  plan. 

1  Second  Report,  op.  cit.,  p.  13. 


TELEPHONE  FRANCHISE  REGULATIONS. 


265 


“  That  this  system  is  unfair  to  many  subscribers  ”,  says  Mr.  Nichols,1 
“  is  universally  conceded.  By  it,  the  subscriber  having  a  small  business 
and  who  uses  the  telephone  infrequently,  pays  the  same  rate  as  the 
subscriber  having  a  larger  business,  whose  telephone  instrument  is  in 
constant  use.  One  pays  too  high  a  rate  and  the  other  too  low  for  the 
service  rendered,  and  this  would  be  particularly  true  in  New  York, 
where  the  use  of  the  telephone  varies  so  materially  among  the  different 
subscribers. 

“  As  the  telephone  system  and  the  use  of  the  system  grows,  so  does 
the  total  cost  of  operation.  Under  the  flat  rate  plan,  the  income  grows 
only  in  proportion  to  the  number  of  telephones,  and  not  in  proportion 
to  the  use  of  the  telephone.  As  the  system  grows,  so  does  the  use  of 
the  telephone,  there  being  more  people  with  whom  each  subscriber  can 
communicate,  but  the  subscriber  does  not  pay  for  such  increased  use 
by  the  flat  rate  plan.  Under  the  measured  rate,  the  subscriber  pays  in 
proportion  to  the  service  rendered,  and,  therefore,  does  pay  for  this 
increased  use,  the  company  being  thereby  repaid  for  its  increased  oper¬ 
ating  cost. 

He  found,  from  his  investigation,  that  in  cities  having 
competing  telephone  systems  only  about  15  per  cent  of  the 
subscribers  found  it  necessary  to  be  connected  with  both  sys¬ 
tems.  He  found  also  that  the  Independent  companies,  by 
their  energy  in  getting  new  business,  had  inspired  the  Bell 
companies  to  make  an  effort  to  increase  the  number  of  their 
subscribers,  as  a  result  of  which  there  had  been  an  enormous 
growth  in  the  number  of  telephones  used,  with  consequent 
benefit  to  all  users.  With  reference  to  the  effect  of  competi¬ 
tion  upon  rates,  he  gave  it  as  his  opinion,  that  the  Bell  com¬ 
panies  had  made  reductions  from  time  to  time  because  of  com¬ 
petition  or  the  fear  of  it.  Discussing  the  effect  of  competi¬ 
tion  upon  efficiency  of  service,  he  said  that  in  many  cases, 
previous  to  the  coming  of  the  Independent  companies,  little 
attention  had  been  paid  to  the  complaints  of  subscribers, 
little  development  of  the  telephone  system  had  been  at¬ 
tempted,  and  the  service  rendered  had  been  unbearable.  Af¬ 
ter  the  advent  of  competition  the  Bell  companies  had  spent 
money  freely  for  the  installation  of  better  apparatus  and  had 
maintained  better  discipline  'among  their  employes.  Gen¬ 
erally  speaking,  the  service  now  rendered  by  the  two  systems 
was  of  about  equal  efficiency,  with  the  exception  that  the 
Bell  companies  had  the  advantage  in  most  parts  of  the  coun¬ 
try  in  long  distance  service,  while  the  Independent  com¬ 
panies  had  the  advantage  here  and  there  through  the  use  of 

1  “Result  of  Investigation  of  the  Operation  of  a  Dual  System  of  Telephones  in 
Various  Cities,”  p.  8. 


266 


MUNICIPAL  FRANCHISES. 


the  automatic  exchange.  Summing  up  his  conclusions  as  to 
the  effect  of  competition  by  the  Independent  companies,  he 
said  i1 

“They  have,  by  a  vigorous  campaign,  been  the  means  of  creating  a 
new  interest  in  the  telephone  business,  resulting  in  a  great  increase  in 
the  number  of  subscribers  of  both  Independent  and  Bell  companies, 
which  has  been  of  great  benefit  to  all  users  of  the  telephone.” 

“They have,  by  competition,  compelled  the  Bell  companies  to  give 
better  service.” 

“They  have  been  the  direct  or  indirect  cause  of  reductions  in  rates 
of  the  Bell  companies.” 

“  Where  Independent  companies  have  installed  the  automatic  system, 
they  have  been  able  to  furnish  to  their  subscribers  a  more  efficient 
service  than  that  of  the  competing  Bell  companies  using  the  manual 
system.  ” 

In  a  final  report  dated  June  17,  1907,  Mr.  Nichols  pre¬ 
sented  to  the  board  of  estimate  and  apportionment,  which  at 
that  time  seemed  disposed  to  grant  a  franchise  to  the  At¬ 
lantic  Telephone  Company,  a  proposed  form  of  contract, 
which,  as  being  the  outgrowth  of  an  extended  study  of  the 
telephone  business  and  as  applying  to  a  great  city  like  New 
York,  I  shall  describe  at  some  length,  although  the  franchise 
provided  by  this  contract  was  not  granted. 

It  was  proposed  to  grant  the  company  the  right  to  con¬ 
struct  and  maintain  a  telephone  system  only,  on  the  theory 
that  such  supplemental  activity  as  the  company  might  desire 
to  undertake  in  the  way  of  doing  a  telegraphic  or  a  telauto- 
graphic  business,  should  be  covered  by  a  separate  grant.  The 
franchise  was  to  run  for  a  period  of  25  years,  subject  to 
renewal  for  a  similar  period  at  the  option  of  the  company 
upon  a  fair  revaluation  of  the  privilege.  It  was  provided 
that  if  the  company  should  determine  to  exercise  its  privi¬ 
lege  of  renewal,  it  must  make  application  to  the  city  not 
earlier  than  two  years  or  later  than  one  year  before  the  ex¬ 
piration  of  its  original  term.  If  the  city  and  the  company 
should  be  unable  to  agree  upon  the  compensation  for  the  re¬ 
newal  prior  to  a  date  one  year  before  the  expiration  of  the 
original  term,  it  was  stipulated  that  the  rate  of  compensation 
for  the  renewal  period  should  be  “  reasonable  ”,  the  exact  rate 
to  be  fixed  by  the  appraisal  of  arbitrators.  But  in  no  case 
should  the  annual  sum  to  be  paid  under  the  renewal  grant  be 
less  than  the  sum  required  to  be  paid  during  the  last  year 
of  the  original  contract.  At  the  end  of  25  years,  or,  in  case 

1  “Result  of  Investigation,”  etc.,  op.  ctf.,  p.  22. 


TELEPHONE  FRANCHISE  REGULATIONS. 


267 


of  the  renewal  of  the  grant,  at  the  end  of  50  years,  or  upon 
the  termination  of  the  franchise  for  any  other  cause,  or 
upon  the  dissolution  of  the  company,  the  plant  and  property 
of  the  company  used  for  telephone  purposes  within  the  street 
lines  of  the  city  were  to  become  the  property  of  the  city 
without  cost,  to  be  used  by  the  city  for  any  purpose  what¬ 
ever.  The  city  might,  however,  as  an  alternative  to  the  ac¬ 
ceptance  of  the  property,  require  the  company  to  remove  all 
its  fixtures  from  the  streets.  There  was  also  reserved  to  the 
city  the  right  to  purchase  at  its  fair  market  value,  exclusive 
of  any  franchise  value,  the  company’s  real  estate,  buildings, 
equipment,  etc.,  not  within  the  streets,  at  the  time  of  taking 
over  the  other  property. 

The  compensation  to  be  paid  by  the  company  for  its  fran¬ 
chise  was  as  follows:1 

(1)  Cash  down,  $250,000. 

(2)  During  the  first  two  years,  1  per  cent  of  gross  receipts,  but  not 
less  than  $20,000  a  year. 

(3)  During  the  next  three  years,  2  per  cent  of  gross  receipts,  but  not 
less  than  $30,000  per  year. 

(4)  During  the  next  five  years,  4  per  cent  of  gross  receipts,  but  not 
less  than  $60,000  a  year. 

(5)  During  the  next  five  years,  6  per  cent  of  gross  receipts,  but  not 

less  than  $100,000  a  year. 

(6)  During  the  next  five  years,  7  per  cent  of  gross  receipts,  but  not 

less  than  $150,000  a  year. 

(7)  During  the  last  five  years  of  the  original  25-year  period,  7£  per 

cent  of  gross  receipts,  but  not  less  than  $200,000  a  year. 

There  was  a  specific  provision  that  no  assignment,  lease 
or  sublease  of  this  franchise,  or  any  part  of  it,  should  be  valid 
unless  it  contained  a  covenant  on  the  part  of  the  assignee  or 
lessee  to  be  bound  by  all  the  conditions  of  this  contract  and 
to  make  all  the  payments  required,  notwithstanding  the  pro¬ 
visions  of  any  other  franchise  or  any  statute.  This  clause 
was  also  to  apply  to  any  purchaser  on  foreclosure  sale.  It 
was  stipulated  that  all  payments  made  under  this  contract 
were  not  to  be  considered  in  any  manner  in  the  nature  of  a 
tax,  but  were  to  be  in  addition  to  all  taxes,  of  whatever  kind 
or  description,  “  now  or  hereafter  required  to  be  paid  by  any 
ordinance  of  the  city  or  by  any  law  of  the  state 

The  company  was  required  to  install  for  the  use  of  the  city, 
free  of  charge,  as  many  telephones  in  each  public  office  as 

1  Third  Report  of  the  Division  of  Franchises  upon  the  Application  of  the 
Atlantic  Telephone  Co.,  p.  13. 


268 


MUNICIPAL,  FRANCHISES. 


might  be  needed  from  time  to  time  by  the  city,  and  to 
furnish  free  service,  throughout  the  term  of  the  grant,  from 
such  telephones  to  any  other  telephones  in  the  company’s 
system  within  the  city  limits. 

The  franchise  was  not  to  be  assigned  in  whole  or  in  part, 
or  leased  or  subleased  in  any  manner  by  the  company  or  its 
successors,  or  by  operation  of  law,  except  with  the  consent 
of  the  city.  Neither  was  the  company  or  its  successors  to  con¬ 
solidate,  or  pool  their  stock  or  interests,  or  enter  into  any 
agreement,  with  any  other  company,  for  division  of  business 
or  territory,  or  to  prevent  competition  or  a  reduction  in  rates. 

Within  six  months  after  the  granting  of  the  franchise,  the 
company  was  required  to  enter  into  contracts  with  other 
telephone  companies,  for  the  full  period  of  its  grant,  to 
provide  for  a  long  distance  service  between  New  York  and 
all  cities  with  a  population  of  4,000  or  more  within  a  radius 
of  1,000  miles.  Certified  copies  of  these  agreements  were  to 
be  filed  with  the  city.  The  company  was  also  bound  to  limit 
the  charges  for  long  distance  service  to  sums  not  exceeding 
75  per  cent  of  the  existing  schedule  of  the  New  York  Tele¬ 
phone  Company. 

It  was  stipulated  that  the  company’s  system  should  be 
constructed  and  operated  subject  to  the  supervision  of  the 
authorities  of  the  city  having  jurisdiction  and  in  strict  com¬ 
pliance  with  the  laws  and  ordinances,  present  and  future,  af¬ 
fecting  telephone  companies  in  the  city.  It  was  provided  that 
the  company’s  telephone  system  should  be  constructed  and 
operated  “  in  the  latest  improved  manner  of  automatic  tele¬ 
phone  construction  ”,  with  the  most  modern  and  improved 
appliances,  “  provided  that  the  manual  system  may  be  used 
in  connection  with  the  automatic  system  for  the  purpose  of 
making  connections  between  stations  within  the  city  and 
stations  without  the  city,  and  also  for  the  purpose  of  making 
connections  between  stations  within  two  different  sections 
within  the  city,  as  hereinafter  described  and  fixed,  and  be¬ 
tween  stations  located  in  districts,  the  boundaries  of  which 
may  be  hereafter  fixed  by  the  board,  but  not  otherwise  The 
company  was  to  give  efficient  and  continuous  service  24 
hours  each  day. 

In  the  Borough  of  Manhattan  and  in  such  portion  of  the 
Borough  of  The  Bronx  as  might  be  directed  by  the  city  au- 


TELEPHONE  FRANCHISE  REGULATIONS. 


269 


thorities,  the  company’s  cables  and  wires  were  to  be  placed 
in  conduits  leased  from  the  company  or  companies  having 
control  of  them,  or  from  the  city  if  it  should  obtain  posses¬ 
sion  of  them.  In  case  the  city  should  construct  subways  for 
electrical  conductors,  the  company  was  to  place  its  wires  in 
them,  and  the  city  agreed  to  lease  the  company  the  requisite 
space.  The  company  was  to  place  in  subways  any  or  all  of 
its  wires  and  conductors  within  one  year  after  being  re¬ 
quired  to  do  so  by  the  city.  If  the  company,  at  any  time  dur¬ 
ing  the  term  of  the  grant  or  its  renewal,  should  construct 
electrical  subways  in  any  part  of  the  city,  the  right  to  pur¬ 
chase  them  was  reserved  to  the  city,  upon  the  payment  of  the 
original  cost,  less  depreciation.  The  company  was  required 
to  file  annually  a  statement  of  the  money  actually  spent  in 
the  construction  of  subways.  The  company  was  required  to 
keep  accurate  books,  showing  such  expenditures,  and  such 
books  were  to  be  open  to  inspection  by  representatives  of  the 
city  for  the  verification  of  the  company’s  statements.  In  any 
electrical  subways  constructed  by  the  company,  there  was  to 
be  reserved  for  the  exclusive  use  of  the  city,  free  of  charge, 
one  duct  at  least  three  inches  in  diameter.  Before  com¬ 
mencing  the  construction  of  any  electrical  subways,  the  com¬ 
pany  was  required  to  obtain  permits  from  the  president  of  the 
borough  in  which  the  work  was  to  be  done  and  from  the  com¬ 
missioner  of  water  supply,  gas  and  electricity.  All  pavement 
replaced  after  being  disturbed  by  the  company,  was  to  be 
kept  in  repair  for  one  year  at  the  company’s  expense,  and  the 
company  was  to  bear  the  entire  cost  for  the  protection  and 
changing  of  all  surface  and  sub-surface  structures  disturbed 
by  it  during  the  construction  of  its  electrical  subways. 

The  company  was  required  to  commence  construction  within 
six  months  after  the  execution  of  this  contract,  and  within 
three  years  thereafter  to  have  erected,  equipped  and  in  opera¬ 
tion,  33,250  telephone  stations  distributed  through  the  five 
boroughs  of  the  city  in  a  prescribed  proportion.  It  was 
specifically  provided  that  the  rights  granted  by  this  contract 
were  to  be  used  in  their  entirety,  and  that  no  part  of  them 
were  to  be  used  in  connection  with  any  other  right  or  fran¬ 
chise  previously  granted,  except  as  expressly  provided  in  this 
contract. 

On  the  first  day  of  November  in  each  year  the  company 


270 


MUNICIPAL  FRANCHISES. 


was  required  to  file  a  map  showing  the  position  of  its  con¬ 
duits  already  laid  and  of  those  proposed  to  be  laid  during 
the  succeeding  year,  with  a  statement  of  the  number  of  ducts 
in  each  street  and  of  wires  in  each  duct  occupied. 

The  board  of  estimate  and  apportionment  reserved  the 
right,  in  its  discretion  and  upon  due  notice  and  hearing,  to 
require  the  company  to  construct  extensions,  install  subsidiary 
connections,  revise  or  improve  its  equipment  or  service  and 
install  any  new  system  of  telephony,  unless  covered  by  patents 
not  under  the  company’s  control. 

It  was  provided  that  during  the  term  of  this  grant  or  its 
renewal,  the  board  of  estimate  and  apportionment  should 
“  have  absolute  power  to  regulate  all  rates,  provided  that 
such  rates  shall  be  reasonable  and  fair,  and  provided,  further, 
that  the  maximum  rates  hereinafter  specified  shall  not  be  in¬ 
creased  for  the  several  districts  described,  so  long  as  any  or 
all  of  said  districts  remain  unchanged 

For  the  purpose  of  fixing  maximum  rates,  the  city  was 
divided  into  three  districts.  The  first  district  included  the 
former  cities  of  New  York,  Brooklyn  and  Long  Island  City; 
the  second  district  included  all  of  the  Borough  of  Queens 
except  Long  Island  City;  and  the  third  district  comprised 
the  Borough  of  Bichmond,  or  Staten  Island.  It  was  pro¬ 
vided  that  between  stations  within  any  district  the  rates  for 
service  should  not  exceed  5  cents  per  call.  In  the  first  dis¬ 
trict  the  company’s  maximum  annual  rates  were  fixed  as 
follows : 

For  four-party  residence  service,  $42. 


three-party  ‘  ‘ 

“  $48. 

two-party  “ 

“  $54. 

direct  line  “ 

“  $60. 

two-party  business 

“  $66. 

direct  line  “ 

“  $90. 

For  private  branch  exchange  switchboard  service: 

first  central  office  line,  $90; 

additional  central  office  lines,  each,  $60; 
local  telephones  connected  with  pri¬ 
vate  branch  exchange,  each,  $18. 

Upon  payment  of  these  rates  the  company’s  subscribers 
were  to  be  entitled  to  unlimited  service  within  the  first  dis¬ 
trict.  The  schedule  of  rates  in  the  second  and  third  districts 
ranged  from  $30  a  year  for  three-party  residence  service,  to 
$48  a  year  for  direct  line  business  service.  Between  stations 
in  the  second  and  third  districts  and  any  station  within  the 


TELEPHONE  FRANCHISE  REGULATIONS. 


271 


Borough  of  Brooklyn,  the  rate  was  not  to  exceed  5  cents  per 
call;  while  between  second  or  third  district  stations  and  any 
station  in  the  Borough  of  Manhattan  or  the  Bronx,  the  rate 
was  not  to  exceed  8  cents  per  call. 

The  company  was  not  permitted  to  “  require  or  receive 
any  deposit  or  advance  payment  in  excess  of  what  is  reason¬ 
ably  necessary  to  insure  payment  of  current  bills  ”,  and  on 
such  amounts,  if  held  for  more  than  one  month,  the  company 
was  to  pay  interest  at  the  statutory  rate.  It  was  provided 
that  unpaid  bills,  unless  due  from  an  owner,  should  not  be 
charged  against  the  property,  and  that  no  person  not  him¬ 
self  in  arrears  should  be  denied  service  because  any  previous 
occupant  of  the  same  premises  was  in  arrears  to  the  company. 

The  wires  of  the  company  were  not  to  be  employed  for 
any  other  purpose  than  the  purposes  set  forth  in  the  grant, 
except  with  the  consent  of  the  city;  and  the  company  bound 
itself  not  to  use,  lease  or  operate  wires  for  illegal  purposes 
or  to  illegal  places. 

The  company  was  required  to  make  a  weekly  report  to  the 
police  commissioner,  showing  the  location  and  number  of 
instruments  installed  by  it,  together  with  the  names  of  the 
persons  contracting  for  their  use.  The  company  was  also 
bound  to  permit  the  police  commissioner  or  his  representatives 
to  examine  any  instrument  installed  by  it,  or  any  connections 
made  by  it,  and  to  remove  any  such  instrument  immediately 
upon  notice  from  him  to  do  so.  The  company  was  to  include 
in  all  contracts  with  its  subscribers  provisions  in  accordance 
with  this  requirement. 

The  company  was  to  assume  all  liability  for  damages  to 
persons  or  property,  resulting  from  the  construction  or  oper¬ 
ation  of  its  system.  If  it  should  fail  to  give  efficient  public 
service  at  the  rates  fixed  in  the  contract,  or  which  might 
thereafter  be  fixed  by  the  city,  or  if  it  should  fail  to  maintain 
its  structures  in  good  condition,  the  city  might  give  the  com¬ 
pany  written  notice  of  its  default;  and,  upon  its  failure  to 
remedy  the  default  or  defect  within  a  reasonable  time,  the 
company  was  to  pay  to  the  city  a  penalty  of  $100  per  day  as 
“  liquidated  damages  The  city  reserved  the  right  to  de¬ 
clare  the  franchise  forfeited  “without  further  proceedings  in 
law  or  equity  ”,  in  case  the  company’s  telephone  system  should 
not  be  operated  for  any  period  of  two  consecutive  months. 


272 


MUNICIPAL  FRANCHISES. 


The  company  was  required  to  make  an  annual  report  to  the 
city  comptroller  of  its  gross  earnings,  with  such  other  infor¬ 
mation  as  the  comptroller  might  require.  That  officer  was 
to  have  access  to  the  company’s  books  for  the  verification  of 
this  report,  and  was  authorized  to  examine  the  company’s  offi¬ 
cers  under  oath  for  the  same  purpose. 

The  company  was  bound  not  to  issue  additional  stock  or 
bonds  until  it  had  received  a  certificate  of  authority  from  the 
city,  stating  the  amount  of  stock  or  bonds  reasonably  required 
for  the  company’s  purposes;  and  no  securities  were  to  be 
issued  in  excess  of  this  amount.  In  order  to  determine  the 
amount  of  capitalization  to  be  allowed  the  company,  the 
board  of  estimate'  and  apportionment  was  authorized  to  hear 
testimony  and  examine  the  company’s  books  and  papers 
pertaining  to  the  value  of  its  property  and  franchises.  The 
company  was  required  to  submit  to  the  board  an  annual  state¬ 
ment  showing  the  amount  of  stock  issued  for  cash  and  for 
property,  the  amount  of  stock  paid  in,  the  amount  of  funded 
and  floating  debt,  the  amount  of  dividends  paid  during  the 
year,  the  amount  paid  as  damages  to  persons  or  property  on 
account  of  construction  and  operation,  and  the  total  expenses 
of  operation,  including  salaries,  with  any  other  information 
in  regard  to  the  business  required  by  the  board.  Failure  to 
comply  with  this  requirement  was  to  be  punished  by  a  penalty 
of  $100  per  day,  this  amount  to  be  collected  by  the  comp¬ 
troller  without  notice. 

The  company  wras  required  to  deposit  with  the  comptroller 
$50,000  in  money  or  in  securities  approved  by  him,  to  make  a 
guaranty  fund  for  the  performance  of  the  company’s  obliga¬ 
tions  under  the  grant,  especially  those  relating  to  the  pay¬ 
ment  of  annual  charges.  If  the  company  should  at  any  time 
be  in  default  on  its  payments,  the  comptroller  was  authorized 
to  take  the  amount  due  from  the  guaranty  fund.  A  penalty 
of  $1,000  was  fixed  for  any  violation  by  the  company  of  the 
terms  of  the  contract  relating  to  the  filing  of  annual  state¬ 
ments,  the  commencement  and  rate  of  construction  of  its 
plant,  or  the  neglect  or  refusal  to  comply  with  the  lawful 
demands  of  the  city  authorities;  and  penalties  of  from  $100 
to  $500  wrere  fixed  for  the  illegal  use  of  wires.  A  unique 
procedure  for  the  imposition  and  collection  of  these  penalties 
was  provided.  On  complaint,  the  comptroller  was  required 


TELEPHONE  FRANCHISE  REGULATIONS.  273 

to  notify  the  company  to  appear  before  him  on  a  certain  day 
to  show  cause  why  it  should  not  he  penalized.  If  the  com¬ 
pany  failed  to  appear  or  if,  after  its  appearance,  the  comp¬ 
troller  adjudged  it  to  be  in  default,  he  was  forthwith  to  im¬ 
pose  the  prescribed  penalty,  or,  in  case  the  amount  of  the 
penalty  was  not  prescribed  in  the  contract,  he  was  to  fix  the 
amount;  and  then,  without  legal  procedure,  he  was  to  with¬ 
draw  the  amount  of  the  penalty  from  the  security  fund  de¬ 
posited  with  him.  Whenever  any  money  was  taken  out  of  the 
security  fund,  the  company  was  required,  on  10  days’  written 
notice,  to  replenish  the  fund  so  as  to  restore  it  to  the  original 
amount  of  $50,000.  In  default  of  such  replenishment,  the 
city  was  authorized  to  revoke  the  franchise  contract. 

In  case  the  company  should  violate,  or  fail  to  comply  with, 
any  of  the  provisions  of  the  contract,  the  franchise  could  be 
forfeited  by  a  suit  brought  by  the  corporation  counsel,  on  10 
days’  notice  to  the  company;  or,  at  the  option  of  the  board 
of  estimate  and  apportionment,  by  resolution  of  this  board. 
In  the  latter  case,  the  resolution  might  contain  a  provision 
that  the  property  constructed  and  in  use  by  virtue  of  the 
grant,  should  thereupon  become  the  property  of  the  city 
“  without  proceedings  at  law  or  equity  ”. 

148.  Monopoly  conditioned  by  ordinance  fixing  rates— 
Chicago.  — On  November  6,  1907,  at  what  is  known  in  Chi¬ 
cago  as  a  “  midnight  session  ”,  the  city  council  passed  an 
ordinance  granting  a  renewal  of  privileges  to  the  Chicago 
Telephone  Company  and  an  ordinance  regulating  telephone 
charges  in  the  City  of  Chicago.1  A  “  midnight  session  ” 
means  a  continuous  session  of  15  or  18  hours,  at  which  an  im¬ 
portant  public  service  franchise  is  finally  passed  a  few 
minutes  before  day-break  the  next  morning.  The  Chicago 
Telephone  Company  enjoys  a  practical  monopoly  of  the  tele¬ 
phone  business  in  Chicago,  although  the  Illinois  Tunnel 
Company,  under  a  franchise  granted  some  years  ago,  has 
several  thousand  automatic  telephones  in  operation  in  the 
central  business  district.  This  latter  company,  under  its 
franchise  obligations,  was  to  have  20,000  telephones  installed 
and  in  operation  by  January  1,  1909.  Some  of  those  who 
opposed  the  granting  of  a  renewal  franchise  to  the  Chicago 

1  “  Ordinance  granting  Privileges  to  the  Chicago  Telephone  Company  and  an 
Ordinance  Regulating  Telephone  Charges  in  the  city  of  Chicago,”  passed  by  the 
City  Council,  Nov.  6,  1907,  published  in  pamphlet  form  by  John  R.  McCabe,  city 
clerk. 


274 


MUNICIPAL,  FRANCHISES. 


Telephone  Company  in  1907,  urged  that  the  city  should,  be¬ 
fore  making  the  grant,  make  a  careful  inquiry  into  the  plans 
and  purposes  of  the  Tunnel  Company,  with  the  idea  of  avoid¬ 
ing  duplicate  telephone  systems.  In  an  address  before  the 
Chicago  City  Club,  November  13,  1907,  Major  Edgar  B.  Tol- 
man  said : 1 

“  Surely,  it  is  no  unreasonable  request  that,  before  an  ordinance  is 
given  for  twenty  years  to  the  Chicago  Telephone  Company,  it  should 
be  determined  whether  or  not  the  system  of  this  other  company,  which 
now  has  a  status  by  law  and  whose  officers  declare  their  intention  to  go 
ahead  and  do  a  telephone  business  in  the  whole  city  of  Chicago,  is 
better  and  cheaper  and  more  desirable  than  the  system  which  has  been 
used  by  the  Chicago  Telephone  Company.  *  *  *  * 

‘  ‘  The  statements  that  have  been  made  from  time  to  time  by  the  pro¬ 
ponents  of  the  Chicago  Telephone  Company,  that  the  automatic  system 
of  telephone  service  is  impracticable  for  a  large  plant,  have  been  amply 
and  absolutely  contradicted  by  the  highest  possible  engineering  expert 
talent,  who  say  that,  like  everything  else,  almost  anything  that  needs 
to  be  done  can  be  done  better  by  modern  labor-saving  machinery  than 
it  can  be  done  by  hand. 

“  If  it  be  a  fact  that  the  new  system  of  telephony  is  as  superior  to  the 
old  as  the  electric  cars  on  our  streets  are  superior  to  horse  cars,  or  as 
the  Hoe  printing  press  is  superior  to  the  old  hand  press,  then  the  very 
first  consideration  of  all — good  service — demands  that  the  modem  sys¬ 
tem  should  be  adopted.  ” 

In  spite  of  all  opposition,  however,  the  Chicago  Telephone 
Company  got  its  renewal  grant.  The  committee  of  the  city 
council  having  the  matter  in  charge,  had  the  subject  under 
consideration  for  nearly  two  years  and  received  an  elaborate 
report  of  a  special  telephone  commission  appointed  for  the 
purpose,  from  which  we  have  already  quoted.  The  terms 
of  this  franchise  are  of  sufficient  interest  to  warrant  careful 
examination.  The  franchise  was  granted  for  a  period  of  20 
years,  ending  January  28,  1929.  It  gave  the  company  the 
right  to  transmit  sound  and  signals  only  by  means  of  elec¬ 
tricity.  The  company  was  required,  throughout  the  term  of 
the  grant,  to  keep  at  its  principal  office  in  the  City  of  Chicago 
“  a  complete  and  separate  set  of  records,  books,  accounts, 
contracts  and  original  vouchers  of  receipts  and  expenditures, 
showing  in  detail  all  the  investments,  disbursements,  ex¬ 
penses,  receipts  and  earnings  of  its  Chicago  business”.  The 
company  was  also  to  keep  at  this  office  any  books  and  records 
relating  to  its  business  that  might  be  required  by  the  city 
comptroller,  and  to  keep  them  in  form  and  manner  as  re- 

*  See  The  City  Club  Bulletin,  Vol.  I,  No.  21,  p.  235. 


TELEPHONE  FRANCHISE  REGULATIONS. 


275 

quired  by  him.  Once  a  year  the  company  was  required  to 
submit  a  report  to  the  city  council,  covering  its  business  for 
the  preceding  year.  The  comptroller,  his  deputy  or  any 
certified  public  accountant  designated  by  the  comptroller,  was 
to  have  the  right  at  any  time  during  business  hours  to  make 
a  complete  examination  at  the  company’s  office  of  all  its 
records,  for  the  purpose  of  verifying  any  statements  of  its 
gross  receipts  provided  for  in  the  ordinance,  or  for  any  other 
purpose  “  connected  with  the  duties  or  privileges  of  the  city 
or  company  ”  under  the  ordinance. 

As  compensation  for  its  franchise,  the  company  was  to  pay 
the  city  3  per  cent  of  its  gross  receipts  for  business  done 
within  the  City  of  Chicago.  This  business  was  described  as 
including  all  receipts  for  local  business  within  the  limits  of 
the  city,  and  also  all  Chicago  receipts  for  toll  and  long 
distance  business. 

The  city  reserved  to  itself  the  right  to  carry,  on  the  top 
cross-arm  of  the  company’s  poles,  the  municipal  telegraph 
and  telephone  wires,  or  to  use  for  this  purpose  one  duct  in 
each  of  the  company’s  underground  conduits  in  any  street 
where  the  city  had  no  conduits  of  its  own ;  or,  in  lieu  of  this* 
the  company  might  furnish  the  city  as  many  wires  in  its 
cables  as  were  necessary  for  this  purpose.  So  long  as  the 
city  made  use  of  this  company’s  system  alone,  the  company 
agreed  to  furnish  the  necessary  telephone  instruments  free 
of  rental.  The  company  also  agreed  to  furnish  telephone 
service  without  charge  throughout  the  city  hall  and  to  furnish 
telephone  facilities  to  all  other  municipal  buildings  and 
offices  at  25  per  cent  discount  from  current  rates.  In  addi¬ 
tion,  there  was  to  be  furnished  free,  a  single  party  line  for 
incoming  messages  only,  in  each  police  station  and  each  fire 
engine  house  in  the  city.  But  the  lines  installed  in  the  engine 
houses  might  be  used  generally  during  emergencies  for  the 
transmission  of  the  business  of  the  department.  The  com¬ 
pany  was  “  expressly  forbidden  to  directly  or  indirectly  give, 
offer,  or  offer  to  give,  promise  to  give,  of  agree  to  give,  to 
any  municipal  or  public  officer  or  employee,  any  free  or 
gratuitous  service  or  discrimination  within  said  City  of 
Chicago  ”. 

The  company  was  required,  without  extra  charge  to  its 
subscribers,  to  maintain  its  plant,  equipment  and  service  “  at 


276 


MUNICIPAL  FRANCHISES. 


the  highest  practicable  efficiency  ”,  and  to  “  promptly  adopt 
and  put  into  use,  within  the  City  of  Chicago,  all  available 
improved  apparatus,  appliances,  equipment  and  methods  of 
service,  developed  in  the  progress  of  the  art  of  telephony, 
which  shall  have  come  into  common  use  from  time  to  time, 
or  if  experience  has  shown  them  to  be  practicable 

The  company  was  required,  under  the  supervision  of  the 
commissioner  of  public  works,  to  construct  and  operate  ex¬ 
tensions  of  its  system  and  new  exchanges  in  any  part  of  the 
city  for  the  purpose  of  supplying  all  kinds  of  service  author¬ 
ized  by  its  franchise,  “  whenever,  in  the  judgment  of  the  city 
council,  it  is  necessary  in  order  to  meet  any  considerable  de¬ 
mand  of  the  public,  or  a  portion  thereof,  for  such  kinds 
of  service,  or  any  of  them,  and  whenever  said  city  council 
shall  so  require  by  ordinance  or  resolution  passed  not  less 
than  30  days  after  a  request”  by  the  council  or  the  proper 
city  officers  asking  the  company  to  do  such  work.  The  council 
also  reserved  the  right  to  regulate,  by  ordinance,  the  com¬ 
pany’s  service. 

The  section  of  this  ordinance  regarded  as  the  most  im¬ 
portant  was  the  one  fixing  maximum  rates  and  providing  for 
service  and  equipment.  Under  this  section  the  company  was 
required  to  furnish,  upon  demand,  telephone  service  of  any 
of  the  classes  described,  without  discrimination,  to  all  per¬ 
sons,  firms  and  corporations  asking  for  it,  at  the  following 
rates : 

For  single-party  line  unlimited  business  service,  $125  per  year,  or  $1 
per  day. 

For  single-party  line  measured  business  service  : — 

including  1,200  outgoing  messages,  $60  per  year; 
for  the  next  2,400  outgoing  messages,  3  cents  each ; 
for  all  additional  messages,  2  cents  each ; 

a  second  single-party  line,  free  to  any  subscriber  guaranteeing  to 
pay  for  7,200  messages  a  year; 

an  additional  single-party  line,  free  for  each  additional  6,000  mes¬ 
sages  ; 

additional  single-party  lines,  to  any  subscriber  to  measured  service, 
for  each  line,  per  quarter,  $6. 

Private  branch  exchange,  with  switching  apparatus  and  appliances, 
free  to  any  subscriber  to  measured  service  contracting  for  two 
or  more  single-party  lines  on  the  same  premises ; 
operator’s  telephone,  free;  but  for  terminal  telephones  connected 
with  the  private  branch  exchange  on  the  same  premises,  each, 
per  quarter,  $1.50. 

No  charge  to  be  made  for  incoming  messages,  except  for  toll  or  long 
distance  messages  when  subscribers  consent  to  pay  for  them. 


TELEPHONE  FRANCHISE  REGULATIONS.  277 

For  single-party  line  unlimited  residence  service,  $18  per  quarter. 

For  two-party  line  unlimited  residence  Service,  $14  per  quarter. 

Nickel  prepayment  service  to  be  furnished  by  means  of  instruments 
equipped  with  coin  box  and  slot  or  similar  device,  as  follows: 
one-party  line,  with  guaranty  of  20c.  per  day,  or  4  messages; 
two-party  line,  with  guaranty  of  12.5c.  per  day,  or  2-£  mes¬ 
sages  ; 

for  residences  only : — 

two-party  line,  with  guaranty  of  10c.  per  day,  or  2  messages, 
four-party  line,  with  guaranty  of  5c.  per  day,  or  1  message. 

Whenever  a  subscriber,  in  making  settlement  with  the 
company  under  these  guaranties,  should  be  required  to  pay 
any  amount  to  make  up  a  deficiency  between  the  amount  in 
the  coin  box  and  the  sum  guaranteed,  he  was  to  receive  a 
receipt  for  the  amount  of  such  deficiency  payment,  and,  at 
any  succeeding  settlement  within  60  days  thereafter,  any 
amount  found  in  the  coin  box  for  local  messages  in  excess  of 
the  amount  due  under  the  guaranty,  was  to  be  applied  to  the 
redemption  of  his  receipt.  The  company  was  required  to 
collect  from  the  coin  boxes  “  approximately  every  30  days  or 
less  The  company  was  expressly  forbidden  to  furnish  tele¬ 
phone  service  to  more  than  four  subscribers  by  means  of  a 
single  line,  and  was  obliged  to  furnish  four-party  line  service 
only  when  at  least  two  subscribers  located  within  the  limits  of 
a  single  block  desired  such  service. 

For  public  telephone  service  the  charge  was  not  to  exceed 
5  cents  for  any  conversation  within  the  city.  The  company 
was  expressly  forbidden  to  authorize  or  permit  any  of  its 
lessees  or  patrons  to  charge  anyone  more  than  this  5-cent 
rate,  and  was  required  to  insert  a  clause  in  every  contract, 
binding  its  lessee  or  patron  not  to  charge  anyone  more  than 
this  rate. 

In  addition  to  its  telephone  system  extending  throughout 
the  city,  the  company  was  authorized  to  maintain  local  or 
neighborhood  exchanges,  and  was  forbidden  to  abolish  any 
such  exchange  already  established,  without  the  consent  of  the 
city  council.  It  was  required  to  establish  new  exchanges  in 
suburban  districts  within  the  city  limits  when  directed  to  do 
so  by  the  council;  but  the  council  was  not  to  give  any  such 
direction  unless  there  was  a  reasonable  demand  for  the  estab¬ 
lishment  of  the  exchange.  Any  subscriber  in  a  neighborhood 
exchange  was  permitted  to  communicate  with  any  telephone 
located  within  the  city  limits  outside  of  his  exchange,  on 


278 


MUNICIPAL  FRANCHISES. 


payment  of  a  charge  not  exceeding  5  cents  for  a  five-minute 
conversation.  The  rates  for  local  or  neighborhood  exchange 
service,  under  yearly  contracts,  were  not  to  exceed  the 
following : 

For  one-party  line,  business  service,  $4  per  month. 

For  two-party  line,  “  “  $3  per  month. 

For  four-party  line,  “  “  $2  per  month. 

For  one-party  line,  residence  service,  $3  per  month. 

For  two-party  line,  M  “  $2  per  month. 

For  four- party  line,  “  “  $1.50  per  month. 

Subscribers  in  the  company’s  general  system  could  not  be 
charged  extra  for  connections  with  subscribers  included  in 
any  neighborhood  exchange. 

For  toll  service  to  any  point  within  15  miles  of  the  city 
hall,  or  within  one  mile  of  the  city  limits  and  within  the 
State  of  Illinois,  the  company  could  not  charge  more  than 
10  cents  for  a  three-minute  conversation  or  more  than  5  cents 
for  each  additional  minute. 

The  company  was  required  to  install  on  each  measured 
service  line  “  a  meter  which  shall  prove  effective  in  actual 
use  for  accurately  and  correctly  recording  the  number  of 
outgoing  messages  or  conversations  over  said  line.”  Any 
question  arising  as  to  whether  a  practicable  meter  had  been 
devised,  was  to  be  submitted  to  the  chairman  of  the  finance 
committee  of  the  city  council,  the  commissioner  of  public 
works  and  the  corporation  counsel,  who  were  given  authority 
to  decide  the  question  and  require  the  company  to  make  such 
changes  in  its  meters,  or  in  the  method  of  operating  them, 
as  they  should  deem  reasonably  necessary  to  protect  the  sub¬ 
scribers.  The  company  was  forbidden  to  charge  a  subscriber 
for  any  message  unless  the  message  was  actually  transmitted, 
except  in  cases  especially  provided  for  in  the  ordinance.  The 
company  was  required  to  furnish  a  subscriber  on  demand,  at 
least  three  extension  telephones  for  each  line  at  a  rate  not 
exceeding  50  cents  per  month  for  each  extension ;  but  not 
more  than  one  extension  could  be  required  by  a  subscriber 
served  on  a  four-party  line. 

The  company  was  required  to  publish  at  least  three  times 
a  year,  and  deliver  to  each  of  its  subscribers,  free  of  charge, 
a  directory  containing  in  alphabetical  order  the  names,  ad¬ 
dresses  and  telephone  numbers  of  all  subscribers  in  the  city 
except  those  who  had  requested  that  their  names  be  omitted. 


TELEPHONE  FRANCHISE  REGULATIONS. 


279 


The  company  was  required  to  furnish,  if  requested,  an  addi¬ 
tional  copy  of  the  telephone  directory  for  each  extension  tele¬ 
phone  in  use.  At  the  request  of  any  subscriber,  the  company 
was  to  include  in  its  directory  list,  in  connection  with  the 
address  and  telephone  number  of  the  subscriber,  the  names, 
in  their  proper  alphabetical  order,  of  not  more  than  three 
partners,  officers,  employes  or  members  of  the  family  of  such 
subscriber,  for  each  single-party  or  two-party  line,  and  to 
make  one  such  listing  for  each  four-party  line  and  each 
neighborhood  exchange  telephone,  these  extra  listings  to  be 
free  of  charge.  One  more  free  listing  was  to  be  made  for 
each  extension  telephone,  and  additional  listings  were  to  be 
made,  on  request,  upon  payment  of  a  maximum  rate  of  $3 
per  year  for  each  additional  name.  This  last  provision,  how¬ 
ever,  was  not  to  apply  to  flat  rate  single-party  line  subscribers 
at  $125  per  year. 

The  company  was  required  to  furnish,  upon  demand  of  any 
subscriber,  a  private  line  or  lines  at  the  rate  of  not  to  exceed 
$5  per  quarter  if  the  extension  was  located  wdthin  one-half 
mile  of  the  subscriber’s  premises,  and  $2.50  more  for  each 
additional  quarter-mile  of  distance.  The  company  was  also 
to  furnish  private  lines  or  wires  not  connected  with  any 
switchboard  and  connecting  any  two  points  not  more  than 
one  mile  apart,  at  the  rate  of  $10  per  quarter,  each,  and  $2.50 
per  quarter  for  each  additional  quarter  mile.  Terminal  or 
extension  telephones  to  be  connected  with  any  line  described 
in  this  paragraph,  were  to  be  furnished  at  a  rate  not  exceed¬ 
ing  $1.50  per  quarter. 

It  was  specifically  provided  that  “  all  rates,  prices  or 
charges  for  telephone  service,  facilities  or  equipment  herein 
prescribed,  are  maximum  rates  only,  and  nothing  herein 
shall  be  construed  as  an  admission  of  the  City  of  Chicago 
that  such  maximum  rates  are  reasonable  or  proper  rates  ”. 
The  company  was  given  18  months  to  make  the  changes  and 
additions  necessary  for  the  adjustment  of  service  to  the  re¬ 
quirements  of  the  ordinance. 

The  council  expressly  reserved  the  right,  from  time  to  time 
during  the  period  of  the  franchise,  to  revise  and  regulate  the 
company’s  rates.  It  was  stipulated  that,  by  the  acceptance: 
of  the  ordinance,  the  company  should  be  understood  as  ex¬ 
pressly  consenting  and  agreeing  promptly  to  accept  and  put. 


280 


MUNICIPAL  FRANCHISES. 


into  effect,  throughout  its  system,  any  “  reasonable  ”  schedule 
of  rates  established  at  any  time  by  the  council  after  the  ex¬ 
piration  of  30  months  from  the  time  this  original  ordinance 
went  into  effect.  But  any  future  revision  of  rates  was  to  be 
for  a  period  of  five  years. 

In  case  the  company  should  contest  the  reasonableness  of 
any  rates  fixed  by  the  council  and  refuse  to  accept  them  pend¬ 
ing  litigation,  and  the  final  determination  of  the  case  should 
be  against  the  company,  then  it  was  to  repay  to  its  subscribers 
all  excessive  collections,  with  5  per  cent  interest. 

It  was  especially  provided  that  the  ordinance  should  not 
be  construed  as  preventing  the  city  from  taking  advantage  of 
any  enabling  legislation  to  pass  general  ordinances  regulating 
or  taxing  telephone  companies  or  prescribing  their  rates,  or 
as  preventing  the  city  from  granting  a  franchise  to  any  other 
company.  The  Chicago  Telephone  Company  was  forbidden 
to  enter  into  any  agreement  or  combination  with  any  other 
telephone  company  in  regard  to  telephone  rates  in  Chicago, 
or  to  make  any  transfer  or  division  of  territory  with  any 
other  telephone  company.  It  was  provided,  however,  that  the 
rights  and  privileges  granted  to  the  company  under  this  ordi¬ 
nance  might  pass,  by  assignment,  mortgage  or  otherwise,  to 
any  legal  successor  of  the  company,  except  a  competitor  in 
the  telephone  business. 

The  company’s  wires  were  to  be  laid  and  kept  in  under¬ 
ground  conduits  in  the  down-town  district,  but  before  laying 
any  new  conduits,  the  company  was  required  to  file  with  the 
proper  city  officials,  plans  showing  each  conduit  to  be  laid, 
the  number  of  ducts  in  it,  and  the  location  of  the  man-holes. 
It  was  required  that  the  name  or  initials  of  the  company 
should  be  placed  on  the  cover  of  each  man-hole.  No  work 
was  to  be  done  in  the  street  except  on  permit  of  the  commis¬ 
sioner  of  public  works.  The  company  was  required  to  restore 
the  streets  disturbed  by  it  to  a  satisfactory  condition,  and 
for  that  purpose  was  to  keep  on  deposit  with  the  city  at  all 
time  a  fund  of  $5,000.  Whenever  the  city  should  under¬ 
take  to  build  a  subway,  either  under  the  terms  of  the  street 
railway  ordinances  granted  in  1907,  or  otherwise,  the  com¬ 
pany  would  be  obliged  to  remove  at  its  own  expense  all  its 
underground  construction  in  the  streets  affected  and  replace 
its  wires  and  conductors  in  the  city’s  subways,  unless  space 


TELEPHONE  FRANCHISE  REGULATIONS. 


281 


could  be  provided  for  them  in  existing  conduits  without  ex¬ 
cavating  in  the  streets.  The  company  was  to  have  the  right 
to  use  the  city’s  subways  upon  the  payment  of  reasonable 
compensation  and  subject  to  reasonable  terms  and  conditions, 
to  be  fixed  by  the  city  council.  In  those  parts  of  the  city 
where  overhead  construction  was  permitted,  the  company’s 
poles  and  wires  were  to  be  placed  in  alleys,  so  far  as  deemed 
practicable  by  the  commissioner  of  public  works;  and  all 
overhead  wires  were  to  be  placed  underground  in  advance  of 
paving  or  repaving,  if  so  ordered  by  this  official.  For  the 
local  distribution  of  wires  from  its  conduits,  the  company 
was  permitted  to  cross  streets  and  alleys  with  overhead  wires 
for  a  distance  not  exceeding  two  blocks  in  length.  Wires 
over  buildings  were  to  be  kept  at  least  8  feet  above  the  roofs, 
except  in  the  case  of  the  buildings  which  they  entered. 

The  company  was  required  to  file  an  acceptance  of  the 
ordinance  with  a  written  surrender  and  waiver  of  any  right 
thereafter  to  construct  or  maintain  its  fixtures  under  the 
terms  of  any  other  ordinance  or  franchise,  whether  granted 
by  the  city  or  by  any  municipal  corporation  within  the  terri¬ 
tory  then  or  thereafter  embraced  within  the  city  limits.  It 
was  clearly  stated  that  the  provisions  of  this  ordinance  were 
to  apply  “  not  only  to  all  the  territory  now  within  the  limits 
of  the  City  of  Chicago,  but  to  all  territory  which  may  here¬ 
after  be  included  within  the  City  of  Chicago  The  com¬ 
pany  was  required  to  pay  the  city  the  sum  of  $35,000  in  full 
settlement  of  all  claims  and  counterclaims  under  the  com¬ 
pany’s  old  franchises. 

The  city  reserved  the  right  to  purchase  the  company’s 
plant  on  January  1,  1919,  on  January  1,  1924,  at  the  termi¬ 
nation  of  the  grant  in  1929,  or  within  thirty  days  after  any 
one  of  these  dates.  This  option  could  be  exercised  for  muni¬ 
cipal,  state  or  federal  operation  of  the  plant.  If  the  city 
desired  to  take  advantage  of  this  privilege,  it  was  required  to 
give  the  company  twelve  months’  notice.  The  plant  which  the 
city  might  purchase  was  to  include  “  all  appurtenances,  ap¬ 
pliances,  equipment,  lines,  lease-holds,  buildings,  stores,  fur¬ 
niture  and  fixtures,  suitable  to  and  used  by  it  for  the  purposes 
of  this  grant,  taking  into  consideration  the  then  condition 
of  the  art  The  price  for  the  property  was  to  be  “  the  then 
cost  of  the  duplication,  taking  into  consideration  the  then 


282 


MUNICIPAL  FRANCHISES. 


condition  of  the  art,  less  depreciation,  of  said  telephone  plant 
and  system  and  other  property  aforesaid,  together  with,  if 
the  said  grant  shall  not  then  have  expired,  5  per  cent  thereon 
in  addition  as  compensation  for  the  compulsory  sale,  but 
there  shall  be  no  allowance  for  earning  power,  or  for  the 
value  of  the  rights  and  privileges  hereby  granted,  or  for  any 
franchise  or  license  value  ”.  The  value  of  the  plant  was  to 
be  determined  by  appraisers,  one  to  be  appointed  by  the  city, 
one  by  the  company,  and  the  third  by  the  two  so  selected.  In 
case  either  party,  after  being  notified  by  the  other  party, 
should  refuse  or  fail  to  appoint  an  appraiser,  or  in  case  the 
two  appraisers  appointed  should  fail  to  agree  upon  a  third 
appraiser  within  thirty  days  after  their  appointment,  either 
the  city  or  the  company,  upon  giving  ten  days’  notice  to  the 
other  party,  could  apply  to  the  judges  of  the  Appellate  Court 
for  the  first  district  of  Illinois,  or  a  majority  of  them,  for  the 
appointment  of  an  appraiser ;  and  any  appraiser  appointed  by 
the  judges,  or  a  majority  of  them,  was  to  have  the  same 
powers  and  duties  as  if  regularly  appointed  in  the  manner 
first  provided.  It  would  be  the  duty  of  these  appraisers  to 
determine  what  tangible  property  of  the  company  was  reason¬ 
ably  required  for  the  continued  operation  of  the  plant.  In 
considering  the  cost  of  duplication  of  underground  structures 
that  had  been  placed  in  the  streets  in  advance  of  paving,  the 
appraisers  were  not  to  take  into  consideration  the  cost  of 
removing  or  replacing  any  pavement.  Within  90  days  after 
the  award  of  the  appraisers,  the  company  was  to  execute  bills 
of  sale  and  deeds,  transferring  the  plant  to  the  city,  and  the 
city  was  to  make  payment  therefor  in  cash.  In  case  the 
award  was  not  made  until  after  the  date  named  by  the  city 
in  its  written  notice  of  intention  to  take  over  the  property, 
the  delay  of  the  appraisers  was  not  to  affect  the  city’s  right 
to  purchase  the  plant.  The  cost  of  the  appraisal  was  to  be 
paid  by  the  city,  and  contracts  were  to  be  entered  into  with 
the  appraisers,  fixing  their  compensation  and  binding  them 
to  complete  their  award  within  a  stipulated  time  or  be  penal¬ 
ized  by  a  specified  reduction  per  day  from  their  allowance. 
This  contract  was  also  to  forbid  the  appraisers  accept¬ 
ing  any  other  or  additional  compensation  for  their  services 
from  any  person,  firm  or  corporation.  In  purchasing  the 
plant,  the  city  was  authorized  to  deduct  from  the  award  one- 


TELEPHONE  FRANCHISE  REGULATIONS. 


283 


half  of  the  cost  of  the  appraisal.  The  appraisers  were  to 
have  the  right  to  make  a  complete  examination  of  the  com¬ 
pany’s  books  and  documents  “  for  the  purpose  of  fully  in¬ 
forming  themselves  as  to  the  actual  cost,  value  and  deprecia¬ 
tion  of  the  plant  and  system  The  city  reserved  the  right 
to  designate,  as  its  licensee,  any  person  or  corporation  having 
the  right  to  operate  a  telephone  system.  Such  licensee  was 
to  have  the  right  to  purchase  the  company’s  plant  at  the  ex¬ 
piration  of  the  grant,  or  within  30  days  thereafter,  in  the 
same  manner  as  that  provided  for  purchase  by  the  city;  and 
it  was  especially  stipulated  that  the  right  of  the  city’s  licensee 
to  purchase  the  plant  under  the  provisions  of  the  ordinance 
should  not  be  in  any  way  impaired  by  any  lack  of  authority 
on  the  part  of  the  city  to  acquire  the  plant  for  itself.  If,  at 
the  expiration  of  the  franchise,  the  city  had  not  chosen  to 
purchase  the  plant  and  had  not  designated  any  licensee,  this 
failure  was  not  to  be  construed  as  an  extension  of  the  fran¬ 
chise  or  any  of  the  company’s  rights  and  privileges.  It  was 
expressly  provided  that  the  city’s  reserved  right  to  purchase 
the  plant  could  be  exercised  only  on  condition  that  the  city 
should  possess  the  charter  power  to  acquire  the  plant  at  the 
time  it  attempted  to  do  so;  but  the  company,  by  the  accept¬ 
ance  of  the  ordinance,  was  understood  as  being  precluded 
from  attacking  or  questioning  the  city’s  authority  reserved 
under  the  franchise.  Apparently,  by  this  provision  the  city 
attempted  to  preclude  the  company  from  raising  the  point 
that  the  option  for  purchase,  reserved  at  a  time  when  the  city 
had  no  authority  to  buy  a  telephone  plant,  would  be  void, 
even  though  the  city  should  secure  the  authority  later. 

The  company  agreed,  by  the  acceptance  of  the  ordinance, 
that  if  it  should  make  default  in  the  fulfilment  of  the  condi¬ 
tions  imposed  upon  it,  and  if  such  default  should  continue 
for  a  period  of  three  months,  “  exclusive  of  all  times  during 
which  the  company  may  be  delayed  or  interfered  with,  with¬ 
out  its  connivance,  by  unavoidable  accidents,  labor  strikes,  or 
the  orders  or  judgments  of  any  court  entered  in  any  suit 
brought  without  its  connivance  ”,  after  written  notice  of  such 
default,  then  the  city  council  would  be  authorized  to  declare 
the  franchise  forfeited. 

One  entire  section,  comprising  more  than  four  pages  of 
this  ordinance,  as  originally  drawn  by  the  council  committee 


284 


MUNICIPAL  FRANCHISES. 


having  the  matter  in  charge,  was  stricken  from  the  ordinance 
on  the  night  of  passage.1  This  section  provided  that  if,  dur¬ 
ing  any  year  of  the  grant,  the  company  should  earn  more 
than  10  per  cent  net  on  its  average  investment  for  the  year,  it 
should  pay  the  surplus  to  the  city  at  the  end  of  the  year.  It 
was  stipulated,  however,  that  this  provision  should  not  be 
taken  as  an  admission,  on  the  part  of  the  city,  that  any  net 
return  of  less  than  10  per  cent  would  be  inadequate  or  un¬ 
reasonable.  In  determining  the  net  earnings,  the  city  comp¬ 
troller  was  to  have  the  right  to  investigate  and  review  the 
reasonableness  of  the  company’s  expenditures  in  carrying  on 
its  business.  The  company  was  to  spend  on  maintenance  and 
repairs,  after  January  1,  1912,  an  average  of  at  least  6  per 
cent  of  its  gross  receipts,  and  was  also  to  set  aside  each  year 
a  reserve  fund  of  not  less  than  4  per  cent  or  more  than  8  per 
cent  of  its  investment,  not  including  land,  stock  of  materials 
or  cash  on  hand.  This  fund  was  to  cover  depreciation  and 
insurance.  For  the  purpose  of  arriving  at  the  amount  of 
the  investment  upon  which  profits  were  to  be  reckoned,  there 
was  to  be  an  appraisal  of  the  company’s  tangible  property 
within  the  City  of  Chicago,  “  consisting  of  operating  plant, 
real  estate  and  buildings,  stock  of  materials  on  hand,  teams, 
tools  and  other  tangible  property  and  working  capital  To 
the  amount  so  fixed  was  to  be  added,  from  time  to  time,  the 
sums  spent  for  making  extensions  of  the  company’s  system 
and  for  other  additions  to  its  tangible  property.  The  amount 
of  working  capital  and  stock  of  materials  to  be  included,  was 
not  to  exceed  in  value  10  per  cent  of  the  other  tangible 
property. 

The  cutting  out  of  this  entire  section  at  the  last  moment 
was  severely  criticised.  Its  provisions  relative  to  turning 
over  to  the  city  the  company’s  net  earnings  in  excess  of  10 
per  cent,  had  been  planned  as  an  automatic  check  upon  un¬ 
reasonable  rates.  There  had  been  considerable  objection  to 
the  schedule  of  charges  fixed  by  the  ordinance,  it  being 
claimed  that,  under  the  terms  of  the  ordinance,  business  men 
would  be  practically  compelled  to  use  measured  service,  and 
that  this  would  result  in  paying  higher  rates  than  had  been 
paid  under  the  company’s  old  franchise.  This  objection  had 
been  met  by  referring  to  section  8  and  saying  that  the  com- 

1  See  Report  of  Committee,  op.  cit.,  p.  285,  for  section  8  of  the  proposed  ordi- 
dinance,  afterwards  stricken  out. 


TELEPHONE  FRANCHISE  REGULATIONS. 


285 


pany  would  prefer  to  reduce  its  rates  rather  than  to  have  all 
net  earnings  in  excess  10  per  cent  on  its  investment  turned 
into  the  city  treasury.  It  had  been  stated  by  the  council 
committee,  in  its  report,  that  the  accounts  kept  by  the  com¬ 
pany  were  entirely  inadequate  as  a  basis  for  intelligent  rate 
regulation,  because  they  failed  to  show  the  cost  of  the  dif¬ 
ferent  kinds  of  service,  and  consequently  the  committee  ad¬ 
mitted  that  the  rates  suggested  by  it  were  a  mere  guess  and 
should  be  subject  to  future  regulation  as  soon  as  the  neces¬ 
sary  data  of  cost  could  be  ascertained.  The  striking  out  of 
section  8  left  these  rates  in  force,  without  any  remedy  except 
from  future  action  taken  by  the  council,  which  naturally 
might  be  opposed  by  the  company. 

149.  Telephone  contract  dominated  by  business  interests — 
New  Orleans.  —  Telephone  companies  in  Louisiana  were 
made  subject  to  supervision  by  the  state  railroad  commission, 
so  far  as  rates  were  concerned,  by  the  constitution  of  1898.1 
The  highest  court  of  the  state  decided,  however,  that  under 
this  authority  the  commission  was  not  empowered  to  regulate 
telephone  service.  This  defect  was  remedied  by  the  adoption 
of  a  constitutional  amendment  in  April,  1908.  Late  in  1907 
the  directors  of  the  New  Orleans  Board  of  Trade  appointed  a 
special  committee  to  inquire  into  telephone  conditions  in  that 
city.  This  committee  made  its  report  in  March,  1908.  It 
called  attention  to  the  fact  that  for  two  years  past  there  had 
been  incessant  complaints  against  the  quality  of  service  fur¬ 
nished  by  the  Cumberland  Telephone  and  Telegraph  Com¬ 
pany,  which  is  the  Bell  company  having  a  monopoly  of  the 
telephone  business  in  that  section  of  the  country.  In  1907 
many  of  the  principal  business  firms  of  the  city,  whose  con¬ 
tracts  had  expired,  received  notice  from  the  company  that  in 
the  future  they  would  have  to  pay  from  40  to  100  per  cent 
more  for  the  same  class  of  service  than  they  had  been  pay¬ 
ing.  Soon  after  this  committee  was  appointed,  ordinances 
were  introduced  into  the  city  council,  looking  toward  the 
granting  of  franchises  to  independent  companies;  but  action 
on  these  ordinances  was  suspended,  pending  the  committee’s 
report.  The  committee  was  strongly  adverse  to  the  estab¬ 
lishment  of  two  or  more  telephone  systems  in  the  city.  Inas¬ 
much  as  the  existing  company  had  an  investment  of  nearly 

*■ 

1  See  “  Telephone  Conditions  in  New  Orleans,  La.,”  op.  cit.,  p.  96. 


286 


MUNICIPAL  FRANCHISES. 


$3,000,000  in  its  New  Orleans  plant  and  about  two  years 
would  be  required  for  another  company  to  establish  a  similar 
system,  which,  when  completed,  would  provide  only  for  local 
service,  leaving  the  community  without  long  distance  connec¬ 
tions,  and  inasmuch  as  the  streets  would  be  dug  up  during 
the  period  of  construction  or  disfigured  by  another  line  of 
unsightly  poles,  this  committee  recommended  that  the 
monopoly  of  the  existing  company  be  maintained,  “  provided, 
always,  that  proper  regulations  respecting  the  service,  rates 
and  extensions  of  its  business  can  be  arranged  in  such  a  man¬ 
ner  as  to  protect  the  interests  of  the  citizens 

Under  the  company’s  original  franchise,  the  city  had  not 
clearly  reserved  the  right  to  pass  further  ordinances  regulat¬ 
ing  service  or  rates.  The  greatest  and  most  common  defect 
in  the  service  furnished  in  New  Orleans  was  said  to  be  the 
extent  to  which  party  lines  and  extension  sets  were  used.  It 
was  said  that  sometimes  as  many  as  10  subscribers  had  been 
placed  on  the  same  line.  The  committee  found,  in  its  in¬ 
vestigation,  that  80  per  cent  of  the  unavailing  calls  and  com¬ 
plaints  of  poor  service  were  “due  to  the  common  nuisance 
of  interference  on  party  lines  It  therefore  recommended 
that  party  lines  should  be  entirely  abolished  for  business 
houses  and  professional  service;  and,  for  residences,  should 
be  restricted  to  two-party  lines.  It  also  said  that  another 
drawback  to  good  service  was  the  use  of  extension  sets  by 
persons  in  the  same  building  for  talking  with  one  another. 
It  recommended,  therefore,  that  extension  sets  should  never 
be  placed  on  party  lines,  and  on  direct  lines  should  be  strictly 
confined  to  the  purpose  for  which  they  were  originally  in¬ 
tended,  that  is,  to  enable  the  telephone  users  to  speak  over 
the  trunk  lines  from  their  chairs  or  desks,  without  having  to 
go  to  the  main  instrument  in  some  other  part  of  the  build¬ 
ing.  In  regard  to  the  regulation  of  rates,  the  committee  was 
of  the  opinion  that  no  one  could  determine  what  would  be  a 
fair  rate  for  telephone  service  five  years  in  advance;  and, 
accordingly,  it  recommended  rates  for  a  period  of  one  year 
only. 

“The  ideal  system  of  charges  for  telephone  service  ”,  said  the  com¬ 
mittee,*  “is,  no  doubt,  the  measured  rate  plan;  but  the  flat  rate,  to 
which  the  public  is  accustomed,  is  already  in  existence  here,  and,  tak- 

1  “  Telephone  Conditions  in  New  Orleans,  La.,”  op.  cit..  p.  14. 

*  "Ibid.,  p.  17. 


TELEPHONE  FRANCHISE  REGULATIONS. 


287 


ing  into  consideration  the  primitive  method  employed  for  recording 
calls  for  measured  rates,  it  would  be  undesirable  to  eliminate  the  flat 
rate  service  at  the  present  juncture.” 

The  committee  found  that  New  Orleans  was  far  behind 
other  cities  in  the  number  of  telephones  in  use  in  proportion 
to  population.  On  December  22,  1907,  the  company  reported 
10,171  subscribers  and  14,094  telephones.  The  committee 
estimated  that  there  should  be  not  less  than  20,000  telephones 
in  use  in  a  city  of  the  size  of  New  Orleans,  “even  making 
allowance  for  the  Negro  element  ”.  As  a  result  of  this  com¬ 
mittee’s  investigation  and  the  report  of  its  special  commis¬ 
sioner,  Mr.  Henry  Noble  Hall,  an  agreement  was  entered 
into  between  the  Board  of  Trade  and  the  telephone  company. 
This  agreement  was  substantially  a  contract  regulating  the 
company’s  rates  and  service  to  the  public  generally,  and  in 
other  cities  would  have  taken  the  form  of  an  ordinance  passed 
by  the  city  council  and  accepted  by  the  company.  This  con¬ 
tract  was  to  be  in  operation  for  the  period  of  one  year,  end¬ 
ing  March  31,  1909,  and  to  be  continued  from  year  to  year 
for  four  years  longer,  unless  one  of  the  parties  should  give 
notice  of  its  cancelation  30  days  prior  to  the  expiration  of 
any  one-year  period.  The  company,  whose  principal  office  is 
at  Nashville,  Tennessee,  agreed  to  keep  a  separate  set  of 
books  for  its  New  Orleans  business  and  to  publish  at  the  end 
of  every  quarter,  in  the  New  Orleans  newspapers,  a  complete 
statement  of  its  gross  earnings  and  expenses  in  the  city,  in 
such  a  way  as  to  show  its  actual  net  earnings  on  its  New 
Orleans  investment.  In  the  gross  earnings  were  to  be  in¬ 
cluded  all  moneys  received  for  long  distance  calls  originat¬ 
ing  in  the  city.  The  Board  of  Trade  was  authorized  at  any 
time  to  appoint  an  expert  to  examine  the  company’s  books 
for  the  purpose  of  verifying  this  statement.  The  company 
agreed  to  “  use  its  best  endeavors  ”  to  extend  its  business, 
with  the  view  of  placing  not  less  than  250  new  telephones  a 
month,  so  as  to  bring  the  total  number  in  use  to  about  17,000 
by  March  31,  1909.  The  company  agreed  also  to  issue,  at 
least  once  every  three  months,  a  directory  embracing  a  com¬ 
plete  list  of  its  subscribers  in  alphabetical  order,  and  also  a 
numerical  list  of  its  subscribers.  The  company  was  also  to 
publish  a  complete  list  of  all  its  classes  of  service  and  rates  on 
the  first  page  of  its  directory  and  at  least  once  a  month  in  the 
newspapers.  The  company  agreed  to  furnish  telephone  serv- 


288 


MUNICIPAL  FRANCHISES. 


ice  upon  demand,  “  without  discrimination  and  at  the  same 
price  to  all  persons,  firms  and  corporations  ”  who  should  elect 
to  take  any  of  the  classes  or  kinds  of  service  offered.  “  Com¬ 
plimentary  telephones  99  in  existence  at  the  time  were  to  be 
abolished.  A  schedule  of  maximum  rates,  ranging  from 
$10.50  a  month  for  unlimited  flat  rate  service  for  business 
houses  to  $4.50  a  month  for  the  same  service  to  residences, 
was  agreed  upon.  Provision  was  also  made  for  measured 
rates  on  the  basis  of  a  minimum  charge  of  $3.50  per  month 
for  business  telephones,  $3  for  “  professional  telephones  ”, 
and  $2.50  for  residence  telephones,  with  an  additional  charge 
of  2  cents  for  each  outgoing  message.  A  special  rate  of  $3.50 
a  month  for  direct  line  unlimited  service,  was  quoted  to 
clergymen,  churches  and  strictly  charitable  institutions.  Pay 
stations  were  to  be  furnished  on  a  monthly  guaranty  of  $6.50. 
If  the  receipts  at  5  cents  per  call  did  not  make  up  this 
amount,  the  subscriber  was  to  pay  the  difference.  If  receipts 
exceeded  this  amount,  the  subscriber  was  to  get  one-half  the 
surplus.  All  of  these  rates  were  subject  to  a  discount  of  50 
cents  per  month  for  each  telephone  if  bills  were  paid  quar¬ 
terly  in  advance.  Special  rates  for  private  branch  exchange 
service  were  set  forth  in  detail,  and  it  was  made  optional 
with  the  subscriber  to  furnish  his  own  private  branch  ex¬ 
change  equipment  on  condition  that  it  should  be  “  substan¬ 
tial  and  efficient The  company  and  the  Board  of  Trade, 
as  parties  to  this  contract,  agreed  to  join  in  a  petition  to  the 
state  railroad  commission,  asking  that  all  service  and  rates 
for  the  City  of  New  Orleans  theretofore  authorized  be  can¬ 
celed,  and  that  the  rates  described  in  this  contract  be  substi¬ 
tuted  therefor.  The  company  agreed,  as  soon  as  the  com¬ 
mission  had  taken  favorable  action  on  this  petition,  to  accept 
no  more  orders  for  party  lines,  except  two-party  line  tele¬ 
phones  for  residences,  and,  within  a  year,  to  substitute  other 
classes  of  service  for  all  party  lines  in  use  for  business  places 
and  professional  service.  The  company  agreed  not  to  make 
any  application  to  the  railroad  commission,  during  the  con¬ 
tinuance  of  this  contract,  asking  for  any  changes  in  its  rates 
or  service,  unless  such  application  had  the  approval  and  en¬ 
dorsement  of  the  Board  of  Trade,  which  in  turn  agreed  to 
give  the  company  its  full  cooperation  in  the  development  of 
its  business  and  the  furtherance  of  its  interests  in  the  City 


TELEPHONE  FRANCHISE  REGULATIONS. 


289 


of  New  Orleans  and  the  surrounding  country,  in  case  the 
company  acted  in  good  faith.  The  rates  agreed  upon  in  this 
contract  were  ratified  by  the  Railroad  Commission  of  Louisi¬ 
ana,  April  29,  1908. 1 

150.  Monopoly  under  Federal  laws— Washington. — Tele¬ 
phone  service  in  the  District  of  Columbia  is  rendered  by  the 
Chesapeake  and  Potomac  Telephone  Company,  a  subsidiary 
of  the  American  Telephone  and  Telegraph  Company.  It  has 
been  the  exclusive  operating  company  in  the  City  of  Washing¬ 
ton  since  the  date  of  its  organization  in  1883.  At  the  present 
time  the  company  charges  $48  per  year  for  unlimited  direct 
line  service  for  residence  telephones.2  On  two-party  lines 
the  charge  for  a  residence  telephone  is  $36  a  year.  For  busi¬ 
ness  places  only  measured  service  is  given.  The  annual  rate 
on  measured  service,  for  either  business  or  Residence  places, 
ranges  from  $39  for  a  minimum  of  600  calls,  and  5  cents  for 
each  additional  call,  to  $144  for  a  minimum  of  4,500  calls, 
and  3  cents  for  each  additional  call. 

The  company’s  franchises  were  originally  acquired  by 
acquiescence.  In  an  investigation  made  in  1898  by  a  special 
committee  of  the  House  of  Representatives  into  telephone 
charges  in  the  District  of  Columbia,  Mr.  Samuel  M.  Bryan, 
president  of  the  company,  testified  that  originally  the  tele¬ 
phone  company  was  a  “  squatter  ”,  in  the  same  way  that  the 
Postal  Telegraph  Company  and  the  electric  lighting  com¬ 
panies  were.3  It  had  been  assumed  that  under  the  organic 
act  establishing  the  present  form  of  government  for  the 
District  of  Columbia,  the  commissioners  had  authoritv  to 
permit  the  construction  of  telephone  lines  under  the  police 
power.  This  authority  having  been  denied  by  the  courts, 
however,  Mr.  Bryan  said :  4 

“  Our  principal  rights  of  way  are  derived  from  the  acquiescence  of 
Congress  in  1880  in  what  we  had  done  previous  to  that  time,  and  in 
their  subsequent  acquiescence  in  what  we  were  doing.” 

Apparently,  the  first  specific  regulation  in  the  laws  of 
Congress  relating  to  telephone  service  in  the  District  of 

1  Order  No.  868,  in  the  matter  of  Telephone  rates,  Exchange  service,  City  of 
New  Orleans. 

*  “Telephone  Service  and  Rates,”  Report  of  Chicago  Council  Committee,  Sept. 
3.  1907,  op.  cit .,  p.  188. 

•  Testimony  relating  to  Telephone  charges  in  the  District  of  Columbia,  reported 
July  8,  1898,  by  the  Committee  to  Investigate  Gas  and  Telephone  Service.  See 
Report  No.  1659,  Fifty-Fifth  Congress,  Second  Session,  1897-98,  House  Reports, 


290 


MUNICIPAL  FRANCHISES. 


Columbia,  was  found  in  the  appropriations  act  approved 
July  18,  1888.  Under  this  act  the  commissioners  of  the 
District  were  forbidden,  after  September  15th  of  that  year,  to 
permit  or  authorize  any  additional  telephone  or  other  wires 
to  be  erected  or  maintained  on  or  over  any  of  the  streets  or 
avenues  of  the  City  of  Washington.1  The  commissioners 
were  further  directed  to  investigate  and  report  to  Congress, 
at  the  beginning  of  its  next  session,  the  best  method  of  in¬ 
terring  the  overhead  wires,  and  also  to  report  what  kind  of 
conduits  should  be  maintained  by  the  city,  if  any,  and  their 
estimated  cost,  and  what  charge,  if  any,  should  be  made  by 
the  city  for  the  use  of  such  conduits  by  persons  or  corpora¬ 
tions  placing  wires  in  them.  It  was  provided,  however,  that 
the  commissioners  might  authorize,  under  such  reasonable 
conditions  as  they  should  prescribe,  any  existing  telephone 
company  then  operating  in  the  District  to  lay  its  wires  under 
any  of  the  streets  of  the  District,  whenever  in  the  judgment 
of  the  commissioners  the  public  interest  should  require  the 
exercise  of  such  authority.  All  such  privileges,  however, 
were  “  to  be  revocable  at  the  will  of  Congress  without  com¬ 
pensation  ”,  and  the  authority  granted  the  commissioners  by 
this  act  was  not  to  be  exercised  after  March  3,  1889. 

In  the  appropriations  act  approved  March  2,  1889,  this 
authority  was  extended  for  another  period  of  two  years.2  In 
the  appropriations  act  approved  August  6,  1890,  there  was  a 
provision  authorizing  the  President  to  appoint  a  board  of 
three  persons,  “  one  of  whom  shall  be  an  army  engineer 
e  skilled  in  electric  matters  ’,  one  a  civil  engineer  of  known 
skill  and  experience  in  municipal  engineering,  and  one  an 
expert  electrician  of  high  repute  ”.3  It  was  provided  that  no 
more  than  one  of  the  members  of  this  commission  should  be 
a  resident  of  the  District,  and  that  no  member  should  be  in 
the  employ  of  any  electric  company  or  have  any  interest  in 
the  business  or  securities  of  such  a  company,  or  in  any  patent 
or  form  of  conduit  or  subway.  This  board  was  to  report 
upon  a  scheme  for  building  electrical  conduits  for  the  City  of 
Washington.  The  next  year  a  clause  was  added  to  the  appro¬ 
priations  act,  requiring  this  board  to  report  also  a  set  of 

1  Laws  Relating  to  Gas,  Electric  Light,  Telegraph  and  Telephone  companies 
etc.,  in  the  District  of  Columbia,  compiled  by  Walter  C.  Allen,  Government  Printing 
Office,  1908,  p.  15. 

>  Ibid.  p.  18. 

*  Ibid.,  p.  19. 


TELEPHONE  FRANCHISE  REGULATIONS. 


291 


recommendations  concerning  a  safe  and  sufficient  wiring  of 
public  and  private  buildings  for  all  electrical  purposes.1 
Pending  the  report  of  the  board  and  its  approval  by  Congress, 
and  prior  to  April  1,  1892,  the  commissioners  of  the  District 
were  forbidden  to  permit  the  additional  construction  of  more 
than  five  miles  in  aggregate  length  of  conduits  or  subways 
for  telephone  service. 

It  does  not  appear  that  Congress  took  any  action  on  the 
report  of  this  board;  for,  in  the  appropriations  act  approved 
August  7,  1894,  there  was  a  provision  that  the  commissioners 
of  the  District  might  authorize  the  erection  and  use  of  tele¬ 
phone  poles  in  the  public  alleys  of  the  City  of  Washington, 
on  condition  that  such  poles  be  subject  to  use  by  the  District, 
without  charge,  for  stringing  its  wires  to  be  used  for  fire 
alarm  and  police  purposes.2  In  this  act  also  there  was  a 
provision  that  any  privileges  granted  under  it  should  be  re¬ 
vocable  at  the  will  of  Congress  without  compensation.  By 
the  appropriations  act  approved  March  3,  1897,  the  authority 
granted  in  the  act  of  1894,  by  which  the  commissioners  were 
authorized  to  permit  the  erection  of  telephone  poles  in  alleys, 
was  limited  by  the  provision  that  thereafter  no  wire  should 
be  strung  on  any  alley  pole  at  a  height  of  less  than  50  feet 
from  the  ground.3  The  commissioners  were  also  authorized 
to  grant  temporary  permits  for  stringing  wires  to  poles  in  the 
alleys,  and  from  alley  poles  in  one  square  to  alley  poles  or 
house-top  fixtures  in  another  square,  for  the  purpose  of  mak¬ 
ing  necessary  house  connections  from  cable  poles  and  existing 
overhead  trunk-lines.  It  was  specifically  stated,  however, 
that  nothing  contained  in  the  act  should  be  deemed  to  author¬ 
ize  the  erection  of  any  additional  pole  upon  any  street,  avenue 
or  public  reservation  within  the  city. 

In  the  appropriations  act  approved  June  30,  1898,  there 
was  a  provision  limiting  the  telephone  charges  in  the  District 
of  Columbia  to  $50  per  annum  for  the  use  of  a  telephone  on  a 
separate  wire,  $40  for  a  two-party  line,  $30  for  a  three-party 
line,  and  $25  for  a  line  connected  with  four  or  more  parties.4 
In  the  appropriations  act  approved  April  27,  1904,  there  was 
a  clause  which  repealed  all  preceding  acts  or  resolutions  regu- 


292 


MUNICIPAL  FRANCHISES. 


lating  telephone  rates  for  grounded  circuits  and  provided 
that  in  the  future,  until  the  population  of  the  City  of  Wash¬ 
ington  should  reach  350,000,  no  telephone  company  operating 
in  the  District  should  be  authorized  to  charge  more  than  $60 
per  annum  for  a  residence  telephone  on  an  individual  metallic 
circuit,  or  $48  in  case  of  a  two-party  metallic  line.1 

In  the  course  of  the  investigation  of  the  congressional  com¬ 
mittee  to  which  reference  has  already  been  made,  it  appeared 
that  at  the  time  of  the  organization  of  the  Chesapeake  and 
Potomac  Telephone  Company,  its  “  franchises,  licenses,  rights 
of  way,  etc.”,  appurtenant  to  the  Washington  plant  wTere 
valued  at  something  over  $581, 000. 2  The  counsel  for  the 
company  urged  that  this  valuation  should  be  accepted  as  a 
legitimate  part  of  the  company’s  investment,  upon  which  it 
was  entitled  to  earn  a  reasonable  profit.  In  reply  to  this 
claim,  Hon.  Mahlon  Pitney,  the  acting  chairman  of  the 
committee,  said : 3 

“  Let  me  call  your  attention  to  this.  The  value  of  what  I  understand 
was  included  in  licenses,  rights  of  way,  etc.,  depended  not  only  upon 
the  value  of  the  patent,  but  upon  the  value  of  what  may  be  called  the 
public  franchise,  although  not  distinctly  granted  as  such — the  con¬ 
tinued  use  of  public  rights,  subject  always  to  the  qualification  that  they 
should  be  exercised  for  the  benefit  of  the  public  and  at  reasonable  rates. 
Something  might  depend  upon  whether  Congress  would  exercise  its 
jurisdiction  or  would  sleep  upon  its  rights.” 

It  appeared  from  expert  testimony  that  the  National 
Capital  Telephone  Company,  the  predecessor  of  the  present 
operating  company  in  the  District  of  Columbia,  had  expended 
$91,000  on  its  plant  up  to  August  1,  1883,  when  it  was  sold 
to  the  present  company,  and  that  it  also  turned  over  to  the 
present  company  cash  and  cash  assets  amounting  to  $77,000 
net.4  The  new  company,  whose  business  also  included  the 
telephone  service  of  Baltimore,  was  capitalized  at  $2,650,000, 
of  which  $750,000  was  issued  in  capital  stock  to  pay  for  the 
plant  and  net  cash  assets  in  the  City  of  Washington,  repre¬ 
senting  a  total,  up  to  that  time,  of  a  little  over  $168, 000. 5 
It  appeared  also  that  on  December  31,  1897,  the  amount  of 
capital  stock  and  bonded  debt  outstanding,  properly  charge¬ 
able  against  the  Washington  end  of  the  business,  amounted 

1  Laws,  etc.,  op.  cit.,  p.  51. 

*  Testimony,  etc.,  ojj.  cit.  pp.  220,  279,  398. 


TELEPHONE  FRANCHISE  REGULATIONS.  293 

to  $899,200.  Between  1883  and  1897  the  present  company 
had  expended  for  actual  construction  on  its  Washington 
plant,  $441,000,  and  for  real  estate  $36,000.  These  items, 
with  proper  allowance  for  working  assets  brought  the  total 
original  investment  up  to  $591,000  at  the  end  of  1897.1 
This  left  a  balance  of  $308,000  to  be  charged  against  “  fran¬ 
chises,  licenses,  right  of  way,  good  will,  etc  Of  the  amount 
expended  on  construction  by  the  present  company,  $215,000 
had  been  spent  out  of  earnings.2  It  appeared  that  during 
the  seven  years  from  1891  to  1897,  inclusive,  the  company, 
after  paying  $138,750  in  dividends  on  its  Washington  stock 
and  $137,689  in  royalties  on  its  Washington  business,  had 
accumulated  a  Washington  surplus  amounting  to  more  than 
$248, 000.3  The  company’s  officers  explained  that  their  policy 
was  to  estimate  at  the  beginning  of  the  year  the  amount  of 
depreciation  which  could  be  expected  'during  that  year  and 
then,  in  case  for  any  reason  the  company  was  prevented  from 
expending  that  amount  of  money  on  replacements  and  re¬ 
pairs,  to  charge  the  unexpended  balance  off  for  depreciation. 
During  the  seven  years  referred  to  there  had  accordingly  been 
charged  off  nearly  $54,000  on  this  account.  This  sum  was 
not  included  in  the  surplus. 

Inasmuch  as  the  Washington  company,  representing  the 
Bell  interests,  has  from  the  beginning  had  a  monopoly  of  the 
telephone  business  in  Washington,  the  contracts  between  the 
parent  company  and  its  local  licensees,  as  printed  in  the  re¬ 
port  of  the  congressional  investigating  committee,  throw  an 
interesting  light  upon  the  policy  of  the  owners  of  the  Bell 
patents.  Under  date  of  April  22,  1878,  Gardiner  G.  Hub¬ 
bard,  as  trustee  for  the  Bell  patents,  issued  the  first  license 
for  the  District  of  Columbia  to  George  C.  Maynard.4  Under 
this  original  agreement  Maynard  was  strictly  the  agent  of  the 
licensor  for  the  purpose  of  leasing  telephones,  making  con¬ 
tracts  and  collecting  telephone  rentals  in  the  District.  While 
the  principal,  under  this  agreement,  was  authorized  to  as¬ 
sign  his  interests,  the  agent  had  no  such  authority,  the  license 
being  personal  to  him.  This  license  or  agency  did  not  in¬ 
clude  the  building  and  operation  of  a  telephone  exchange,  but 
merely  the  supplying  of  telephones  for  private  lines.  The 


1  Testimony,  etc.,  op.  cit.,  p.  217. 
*  Ibid.,  p.  219. 


*  Ibid.,  pp.  220.  221. 
4  Ibid.,  p.  106. 


294 


MUNICIPAL  FRANCHISES. 


principal  agreed  to  furnish  the  telephones  and  call  bells 
needed,  delivered  at  the  office  of  the  Bell  Telephone  Company 
in  Boston;  the  agent  agreed  to  pay  in  advance  at  the  rate 
of  $2  for  each  telephone  and  $3  for  each  call  bell  taken  by 
him.  The  agent  agreed  to  construct  with  his  own  capital  all 
lines  that  might  be  reasonably  required  in  the  District  for 
use  in  connection  with  telephones  and  to  lease  or  sell  such 
lines  on  reasonable  terms.  The  rental  for  the  telephone  in¬ 
struments  themselves  was  fixed  in  a  schedule  attached  to  the 
agreement,  and  the  agent  was  to  receive,  for  his  share,  50  per 
cent  of  the  rental  money  collected  for  telephones  and  20  per 
cent  of  the  money  received  for  rent  or  sale  of  call  bells.  The 
principal  reserved  the  right  to  change  the  schedule  of  rates 
from  time  to  time  in  conformity  with  prices  charged  in 
other  places.  It  was  agreed  that  for  all  requirements  of  the 
United  States  government  and  the  government  of  the  Dis¬ 
trict,  telephones  and  call  bells  should  be  supplied  by  the 
principal  to  the  agent  and  that  the  latter  should  have  the 
right  to  furnish  them  to  the  government  without  requiring 
any  formal  contracts  for  their  use.  The  agent  was  required 
to  pay  all  moneys  due  to  the  principal  on  account  of  the 
rental  of  the  instruments  to  the  governments  “  as  fast  as  they 
can  be  collected,  using  his  best  efforts  to  secure  the  permanent 
use  of  telephones  by  said  governments  and  to  promptly  collect 
all  rentals  therefor  It  appears  from  the  terms  of  this 
agreement  that,  so  far  as  the  instruments  themselves  were 
concerned,  the  rental  schedule  was  originally  fixed  by  the 
principal  and  might  be  changed  by  him  from  time  to  time, 
but  the  agent  was  authorized  to  construct  telephone  lines  and 
lease  them  to  the  users  of  telephones  for  such  additional 
rental  as  he  might  see  fit  to  charge.  The  agent  was  required, 
however,  to  “  use  his  best  efforts  in  all  proper  ways  to  intro¬ 
duce  telephones  to  the  utmost  possible  extent,  and  to  preserve 
leases  therefor  for  use  in  the  District  ”.  In  case  any  tele¬ 
phone  instruments  received  by  the  agent  from  the  principal 
should  be  lost,  stolen  or  destroyed  without  the  agent’s  fault, 
his  account  with  the  principal  could  he  squared  by  the  pay¬ 
ment  of  the  actual  cost  of  manufacturing  the  instruments. 
This  contract  was  made  for  a  term  of  six  years  and  was  to 
continue  beyond  that  time  until  three  months  after  notice  of 
its  termination  had  been  given  by  either  party.  The  princi- 


TELEPHONE  FRANCHISE  REGULATIONS. 


295 


pal  agreed  to  bear  all  expense  incident  to  any  litigation  in 
regard  to  telephone  patents. 

On  December  2,  1878,  a  new  agency  agreement  was  issued 
to  Maynard  by  the  Bell  Telephone  Company,  as  successor  of 
Hubbard.1  Under  this  agreement  Maynard  secured  the  right 
to  establish  a  district  or  exchange  telephone  system  and 
agreed  to  extend  it  from  time  to  time  as  rapidly  as  possible 
and  as  the  public  need  should  require,  and  to  furnish  service 
to  subscribers  “  at  fair  rates,  not  exceeding  the  rates  charged 
in  other  cities  of  like  population  ”.  Under  this  agreement 
Maynard  was  authorized  to  associate  with  himself  one  or 
more  partners  for  .the  purpose  of  carrying  on  the  business, 
and  the  license,  instead  of  being  for  a  term  of  six  years,  was 
to  continue  during  the  life  of  the  Bell  patents.  It  was  pro¬ 
vided,  however,  that  in  case  the  licensee  failed  to  organize  the 
telephone  system,  to  prosecute  the  business  with  reasonable 
dispatch  or  to  pay  any  rental  due  the  company,  the  latter,  upon 
giving  not  less  than  60  days’  notice,  might  take  possession  of 
the  licensee’s  premises  and  all  telephone  lines  and  fixtures, 
or  other  property  belonging  to  the  licensee  and  used  in  con¬ 
nection  with  the  business.  In  other  words,  if  the  licensee 
defaulted,  the  principal  was  authorized  to  enter  into  posession 
of  the  property  for  the  purpose  of  continuing  the  telephone 
service.  Upon  payment  of  the  expenses  incurred  in  conse¬ 
quence  of  the  default  and  all  arrearages  of  rent,  the  licensee 
had  the  right  to  regain  possession  of  the  property  and  the 
business.  Under  this  contract  the  company  extended  the 
licensee’s  rights  under  the  preceding  contract  for  private 
lines,  to  correspond  with  the  life  of  the  patents. 

By  an  agreement  made  October  28,  1879,  between  Maynard 
and  the  National  Bell  Telephone  Company,  which  in  the 
meantime  had  succeeded  the  Bell  Telephone  Company,  the 
licensee’s  commission  was  reduced  from  50  per  cent  to  40 
per  cent  of  the  telephone  rentals  collected  by  him.2  It  was 
stated  that  this  reduction  was  made  in  view  of  the  fact  that 
the  company  was  about  to  enter  into  an  agreement  with  the 
Western  Union  Telegraph  Company,  representing  the  Gold 
and  Stock  Telegraph  Company,  the  American  Speaking  Tele¬ 
phone  Company,  and  the  Harmonic  Telegraph  Company,  by 
which  under  certain  conditions  the  Bell  company  was  to 

1  Testimony,  etc.,  op.  cit.,  p.  168.  *  Ibid.,  p.  169. 


296 


MUNICIPAL  FRANCHISES. 


“  obtain  full  and  exclusive  license  to  make  and  to  use  speak¬ 
ing  telephones,  call  bells,  and  switches,  and  other  appliances 
for  use  in  telephone  lines  and  any  inventions  or  improve¬ 
ments  applicable  thereto  ”,  which  the  Western  Union  and  its 
allied  companies  then  owned  or  controlled.  The  Bell  com¬ 
pany  evidently  considered  that  40  per  cent  of  the  rentals  on 
a  monopoly  business  would  be  as  profitable  to  its  licensee  as 
50  per  cent  subject  to  competition  by  the  Western  Union  and 
its  allied  interests.  Under  this  modified  agreement  the  licen¬ 
see  agreed  to  take  over  all  the  plant,  fixtures,  etc.,  acquired 
by  the  Bell  company  from  the  Western  Union  in  the  District 
of  Columbia,  at  the  price  agreed  upon  by  .the  Bell  and  West¬ 
ern  Union  companies,  which  according  to  the  statement  of 
the  Western  Union  would  be  less  than  $2,500.  Another 
point  covered  by  the  modified  agreement  was  the  long  dis¬ 
tance  traffic,  which  the  Bell  company  reserved  to  itself  ex¬ 
clusively.  The  licensee,  however,  agreed  to  collect  long  dis¬ 
tance  tolls  for  the  company  and  turn  over  all  the  long 
distance  business  he  could  legally  control  to  the  Bell  company 
or  such  parties  as  it  might  designate.  The  licensee  was  to 
receive  a  reasonable  commission  on  this  business.. 

The  agreement  between  the  National  Bell  Telephone  Com¬ 
pany  and  the  Western  Union  Telegraph  Company  and  its 
subsidiaries,  anticipated  in  the  modified  agency  agreement 
just  described,  was  entered  into  on  November  10,  1879. 1 
Under  its  terms  the  telegraph  companies  agreed  to  withdraw 
from  the  telephone  business  and  to  transfer  their  patents, 
then  held  or  thereafter  acquired,  to  the  National  Bell  Tele¬ 
phone  Company.  In  consideration  for  this  action  the  Bell 
company  agreed  to  pay  the  Western  Union  20  per  cent  of 
all  royalties  or  rentals  collected  by  it  “  from  licenses  or 
leases  of  speaking  telephones  ”,  not  including,  however,  call 
bells,  batteries,  wires  and  other  appliances  or  services  fur¬ 
nished  or  performed.  The  Western  Union  was  also  to  receive 
a  bonus  of  20  per  cent  of  the  net  profit  derived  by  the  Bell 
company  from  the  manufacture  and  sale  of  telephones  ex¬ 
ported  to  foreign  countries.  The  gross  rentals  to  be  charged 
by  the  Bell  company  were  fixed  in  this  agreement  at  $10  per 
annum  for  each  telephone  where  only  one  instrument  -was  to 
be  used  at  a  station,  or  $15  for  a  pair  of  telephones  composed 

1  Testimony,  etc.,  op.  cit.,  p.  225. 


TELEPHONE  FRANCHISE  REGULATIONS. 


297 


of  a  transmitter  and  a  receiver.  From  this  standard  rate, 
however,  the  Bell  company  was  to  be  allowed  a  discount  of  40 
per  cent  in  order  to  cover  the  commission  allowed  to  its 
licensees  for  handling  the  instruments.  It  was  provided  that 
the  Bell  company  might  change  the  standard  rates  of  gross 
rentals  or  royalties  charged  for  the  use  of  its  telephone  in¬ 
struments,  subject  to  certain  conditions.  No  such  reduction 
could  be  made  which  would  operate  to  reduce  the  bonus  of 
the  Western  Union  Telegraph  Company  below  $1  per  annum 
for  each  terminal  single  telephone  and  $1.80  per  annum  for 
each  terminal  pair,  unless  such  reduction  was  made  with  the 
consent  of  the  Western  Union  Telegraph  Company  or  by 
arbitration. 

“  Whereas  it  is  difficult  ”,  said  this  famous  agreement,  “to  determine 
absolutely  and  in  advance  the  price  which  at  all  times  and  for  all  pur¬ 
poses  it  will  be  advantageous  for  the  interests  of  the  patents  and  of  both 
the  parties,  as  interested  in  income  derived  from  royalties  and  rentals,  to 
charge,  either  with  a  view  of  increasing  the  revenue  of  the  parties  hereto 
from  royalties  and  rentals  by  enlarging  the  demand  for  the  instruments, 
or  under  circumstances  of  competition,  it  is  agreed  that  the  party  of  the 
second  part  (National  Bell  Telephone  Company)  in  cases  where  its 
power  to  reduce  is  qualified,  as  hereinbefore  expressed,  may  reduce  the 
rentals  either  generally  or  for  a  particular  purpose,  or  a  particular 
locality,  or  a  particular  licensee  or  class  of  licensees,  to  such  sum  as 
may  be  advantageous  as  aforesaid  for  the  interests  of  both  parties  and 
as  may  be  determined  by  agreement  of  the  parties  hereto,  or  as  provided 
in  this  article.” 

The  provision  “  in  this  article  ”  was  for  a  reference,  in 
case  of  dispute  between  the  two  companies,  to  three  disin¬ 
terested  persons,  one  to  be  chosen  by  each  of  the  companies 
and  the  third  to  be  chosen  by  the  first  two.  It  was  provided, 
however,  that  if  the  third  referee  should  not  be  selected 
within  a  given  period,  the  company  desiring  the  change  in 
rates  could  apply  to  any  judge  of  the  United  States  Circuit 
or  District  Court  in  the  city  of  Boston,  New  York  or  Brook¬ 
lyn  and  request  him  to  appoint  the  board  of  three  referees. 
The  decision  of  the  referees  so  appointed  was  to  be  binding 
upon  both  parties  for  a  period  of  at  least  six  months,  unless 
the  question  at  issue  should  be  resubmitted  to  the  same 
referees.  The  limitation  upon  the  power  of  the  Bell  com¬ 
pany  to  cut  rates  was  not  to  continue,  however,  past  the  ex¬ 
piration  of  the  principal  Bell  patents  in  1894.  This  agree¬ 
ment  was  to  remain  in  effect  for  the  period  of  17  years,  that 
is,  until  November  1,  1896. 


298 


MUNICIPAL  FRANCHISES. 


On  December  1,  1879,  Maynard,  as  licensee  of  the  National 
Bell  Telephone  Company  for  the  District  of  Columbia,  trans¬ 
ferred  his  right  to  conduct  a  telephone  exchange  business  to 
the  National  Capital  Telephone  Company.  On  June  9,  1881, 
he  transferred  his  right  to  furnish  telephones  for  private 
lines  under  his  original  agency  agreement,  to  Henry  D. 
Cooke,  Jr.1  No  copy  of  the  first  transfer  was  furnished  to 
the  Congressional  investigating  committee,  and  in  the  copy 
of  the  second  transfer  the  consideration  was  left  blank.  At 
a  later  date,  the  exact  time  not  being  given,  Cooke,  who  was 
a  heavy  stockholder  in  the  National  Capital  Telephone  Com¬ 
pany,  offered  to  sell  to  the  company,  for  $50,000  in  stock  or 
cash,  the  “  valuable  franchise  ”  which  he  had  secured  from 
Maynard.2  It  appears  that  this  offer  was  accepted  and  that 
Mr.  Cooke’s  holdings  in  the  local  company’s  stock  were  in¬ 
creased  by  the  amount  of  $50,000  on  account  of  the  “  fran¬ 
chise  ”  referred  to. 

Under  the  original  agency  agreements  these  transfers  by 
the  licensee  of  the  Bell  interests  would  not  be  valid  without 
the  approval  of  the  parent  company.  This  approval  was 
secured  by  two  agreements  dated  March  31,  1883,  between  the 
American  Bell  Telephone  Company  and  the  National  Capital 
Telephone  Company.3  Under  these  agreements,  one  of  which 
was  a  lease  and  license  for  the  operation  of  the  telephone  ex¬ 
change,  and  the  other  a  lease  and  license  for  the  operation 
of  telephones  for  private  lines,  social  lines,  etc.,  it  was  ex¬ 
pressly  provided  that  the  ownership  of  all  telephone  instru¬ 
ments  should  remain  with  the  parent  company.  The  licensee 
company  was  given  the  exclusive  privilege  of  operation,  how¬ 
ever,  within  the  District  of  Columbia  and  agreed  to  supply, 
by  general  or  special  exchanges,  all  reasonable  demands  of 
the  public  and  to  be  diligent  to  increase  the  number  of  tele¬ 
phones  used  on  its  exchanges.  It  was  also  expressly  provided 
that  call  bells,  switches,  switch-boards  and  other  apparatus 
furnished  by  the  parent  company,  should  not  be  used  in  con¬ 
nection  with  any  telephones  except  those  furnished  by  that 
company,  and  were  not  to  be  disposed  of  to  anyone  not 
licensed  by  that  company.  The  local  company  agreed  to  pay 
the  parent  company  60  per  cent  of  the  rental  or  royalty  col- 

1  Testimony,  etc.,  op.  cit.  p.  176. 

*  Ibid.,  p.  it?. 

*  Ibid.,  pp.  177, 181. 


TELEPHONE  FRANCHISE  REGULATIONS.  299 

lected  for  the  use  of  telephone  instruments,  the  standard  rate 
to  be  $10  per  annum  for  each  battery  transmitter  and  $10 
for  each  magneto  telephone.  These  rates,  however,  might  be 
changed  from  time  to  time  by  the  parent  company.  It  was 
provided  that  the  second  party  (the  local  company)  “will 
not,  without  special  leave  of  the  licensor,  so  far  as  it  can  law¬ 
fully  prevent  it,  permit  the  transmission  over  such  connecting 
lines  of  general  business  messages,  market  quotations,  or 
news  for  sale  or  publication,  nor  any  communications  in  be¬ 
half  of  other  parties  than  those  who  directly  communicate 
by  the  telephone,  by  themselves  or  their  servants  or  agents 
personally  present  at  the  instruments,  and  no  person  engaged 
in  the  business  of  transmitting  messages  for  other  parties 
shall  be  authorized  or  knowingly  allowed  by  the  second  party 
to  transmit  such  messages  over  such  lines  ”. 

The  parent  company  reserved  to  itself  the  right  to  use  the 
local  company’s  office  and  exchange  for  its  long  distance  busi¬ 
ness  or  to  establish  independent  offices  for  that  purpose.  The 
Western  Union  Telegraph  Company  was  named  in  this  agree¬ 
ment  as  the  company  which  was  to  perform  all  telegraphic 
transmission  of  messages  collected  from  the  telephone  lines. 
The  local  company  had  no  right  to  assign  its  license  without 
the  approval  of  the  parent  company.  Furthermore,  it  agreed 
that  it  would  not  allow  any  telegraph  company  to  use  or  have 
any  rights  on  its  poles  or  other  structures  without  the  assent 
of  the  parent  company.  The  local  company  also  agreed  to 
build  and  equip  at  its  own  cost  the  necessary  lines  between 
its  telephone  exchange  and  the  Western  Union  Telegraph 
Company’s  offices;  and  in  consideration  of  this  undertaking 
the  local  company  was  to  receive  50  per  cent  of  the  commis¬ 
sions  paid  by  the  telegraph  company  on  messages  delivered  to 
it.  The  second  agreement  of  the  same  date  between  the 
parent  company  and  the  local  company  covered  the  use  of 
private  lines,  club  lines,  social  lines  and  speaking  tube 
telephones. 

On  July  30,  1883,  the  National  Capital  Telephone  Com¬ 
pany  transferred  its  property  and  franchises  to  the  Chesa¬ 
peake  and  Potomac  Telephone  Company,  which  had  also 
purchased  the  property  of  the  Telephone  Exchange  Company 
of  Baltimore.1  On  August  1,  1883,  an  agreement  was  entered 


1  Testimony,  etc.,  op.  cit .,  p.  184. 


300 


MUNICIPAL  FRANCHISES. 


into  between  the  American  Bell  Telephone  Company,  the 
Chesapeake  and  Potomac  Telephone  Company,  and  the  two 
local  companies,  which  had  up  to  that  time  furnished  tele¬ 
phone  service  in  Washington  and  Baltimore.1  An  interest¬ 
ing  side-light  upon  what  is  supposed  to  have  been  the  usual 
custom  of  the  parent  company,  is  thrown  by  one  of  the  ex¬ 
hibits  in  this  agreement.  This  exhibit  shows  that  the  parent 
company  had  in  1882  made  an  agency  agreement  with  the 
local  Baltimore  company  by  which  the  latter  agreed  to  turn 
over  to  the  parent  company,  in  addition  to  the  required  royal¬ 
ties,  35  per  cent  of  all  its  capital  stock,  originally  issued  or 
that  might  be  issued  thereafter.  For  some  unexplained  reason 
this  requirement  was  not  contained  in  any  of  the  Washington 
agreements. 

On  February  7,  1885,  and  March  25,  1886,  agreements 
were  entered  into  between  the  parent  company  and  the 
Chesapeake  and  Potomac  Telephone  Company  for  certain 
extra-territorial  connecting  lines.2  The  first  of  these  was  the 
long  distance  line  between  Baltimore  and  Washington  and 
intermediate  places.  For  the  use  of  the  local  company’s 
poles,  the  parent  company  agreed  to  pay  a  rental  of  $4  per 
mile  per  annum  for  each  wire  it  strung  upon  them.  The 
local  company  was  to  pay  the  parent  company,  in  addition  to 
the  required  royalty  on  instruments,  one-fourth  of  its  gross 
receipts  from  long  distance  tolls,  such  tolls  to  be  not  less 
than  at  the  rate  of  15  cents  for  the  first  10  miles,  and  5  cents 
for  each  additional  10  miles,  for  a  5-minute  talk.  It  appears 
from  the  copies  of  these  agreements  published  in  the  testi¬ 
mony  taken  before  the  Congressional  investigating  committee, 
that  these  contracts  or  agency  agreements  were  made  in  ac¬ 
cordance  with  standard  forms,  wdiich  were  presumably  used 
by  the  parent  company  for  its  licensees  everywhere. 

Copies  of  the  contracts  entered  into  by  the  local  company 
with  its  Washington  subscribers,  were  also  furnished  to  the 
committee.3  There  are  several  important  and  interesting 
features  of  the  rules  and  regulations  made  a  part  of  these 
contracts.  These  rules  provide  that  the  telephone  instru¬ 
ments  and  lines  on  the  subscriber’s  premises  shall  be  for  the 
subscriber’s  use  only.  The  subscriber  is  to  pay  $10  for  each 

1  Testimony,  etc.,  op.  cit .,  p.  1S5. 

*  find.  p.  188,  “Form  13C”  ;  p.  192,  “Form  13D.” 

•  Testimony,  etc.,  op.  cit.,  p.  141, 


TELEPHONE  FRANCHISE  REGULATIONS. 


301 


telephone  or  transmitter  destroyed  otherwise  than  by  un¬ 
avoidable  accident,  and  $25  a  month  for  each  instrument  re¬ 
moved  or  detained  without  authority,  until  its  destruction  or 
loss  without  the  subscriber’s  fault  is  satisfactorily  proved. 
The  company  assumes  no  liability  for  the  interruption  of 
communication  from  any  cause  whatever,  except  to  repay  a 
proportionate  rebate  of  the  telephone  rental  for  interruptions, 
continuing  after  24  hours’  written  notice  from  the  sub¬ 
scriber,  and  aggregating  more  than  three  days  a  month.  The 
company  agrees  to  remove  the  telephone  instruments  from 
place  to  place  at  the  request  of  the  subscriber  and  at  his  ex¬ 
pense.  In  accordance  with  the  terms  of  its  license  agreement, 
the  company  has  included  in  its  rules  a  provision  that  the 
telephone  shall  not  be  used  for  performing  any  part  of  the 
work  of  collecting,  transmitting  or  delivering  any  message 
in  respect  of  which  any  toll  has  been  paid  to  any  other  party, 
nor  for  transmitting  market  quotations  or  news  for  sale, 
publication  or  distribution,  or  for  calling  messengers  except 
from  the  central  office  of  the  company,  “or  performing  any 
other  service  in  competition  with  service  which  the  said  com¬ 
pany  may  undertake  to  perform  ”.  The  subscriber  is  for¬ 
bidden  to  attach  to  the  telephone,  or  use  in  connection  with 
it,  any  instrument  or  appliance  of  any  kind  whatever,  not 
furnished  by  the  company,  without  its  written  consent.  The 
company  reserves  the  right,  in  case  any  law  is  passed  which, 
in  its  opinion,  tends  materially  to  increase  the  cost  of  main¬ 
taining  telephonic  communication  between  its  subscribers,  to 
terminate  the  contract  and  remove  its  instruments  before  the 
expiration  of  the  contract  period.  The  regular  period  of  the 
contract  is  one  year.  After  the  expiration  of  that  time  it 
may  be  terminated  by  either  party  on  10  days’  notice.  The 
subscriber  is  required  to  pay  his  telephone  rental  quarterly 
in  advance.  In  case  of  his  failure  to  pay  any  sum  due,  or  in 
case  of  any  improper  use  of  the  telephone  on  his  premises  or 
of  any  use  contrary  to  these  rules  and  regulations,  the  com¬ 
pany  reserves  the  privilege  of  terminating  the  subscriber’s 
right  to  use  the  telephone  instruments  by  24  hours’  written 
notice. 

In  the  course  of  his  testimony  before  the  Congressional 
committee,  Mr.  Bryan,  president  of  the  company,  made  some 
interesting  statements  relative  to  the  use  and  the  abuse  of 


302 


MUNICIPAL  FRANCHISES. 


the  telephone  by  the  public.  In  explaining  the  reason  for 
the  establishment  of  public  pay  stations  in  Washington,  he 
said  that  at  one  time  drug  stores  were  permitted  to  maintain 
flat-rate  public  stations  by  paying  $25  more  than  the  reg¬ 
ular  rate.1  Under  this  arrangement  these  drug  store  sta¬ 
tions  were  used  by  every  one  who  chose  to  use  them.  This 
became  such  an  abuse  “  that  a  drug  store  telephone  was  made 
to  serve  a  dozen  or  twenty  square  blocks,  for  marketing  and 
for  every  purpose  for  which  the  whole  neighborhood  desired  to 
use  a  telephone,  and  the  cost  of  maintaining  it  and  operating 
it  was  out  of  all  proportion  to  the  money  received  ”.  To  over¬ 
come  this  difficulty,  the  company  removed  the  telephones  from 
the  drug  stores  and  replaced  them  with  automatic  machines 
on  condition  that  every  one  who  used  the  telephone  should 
pay,  except  the  druggist,  who  had  the  right  to  call  up  all 
other  druggists  or  physicians  without  charge.  Mr.  Bryan 
also  stated  that  at  one  time  it  had  been  the  practice  of  the 
exchange  to  furnish  subscribers  with  information  about  boat 
races,  ball  games,  the  location  of  fires  and  other  matters. 
On  one  occasion  a  newspaper  man,  who  had  been  out  late 
on  the  night  of  a  fire,  found  that  it  was  impossible  for  him 
to  get  into  communication  with  his  office  through  the  ex¬ 
change.  His  wires  were  all  right,  but  the  demand  on  the 
operators  for  fire  news  was  so  great  that  the  legitimate  bus¬ 
iness  was  clogged  and  in  this  case  practically  stopped.  As 
a  result  of  this  incident,  a  new  regulation  was  put  into  effect 
by  the  company,  requiring  its  operators  at  all  hours  of  the 
day  or  night  to  confine  themselves  exclusively  to  giving  con¬ 
nections  asked  for  by  subscribers.2  The  operator  was  in¬ 
structed,  in  case  information  was  asked,  as  soon  as  she  as¬ 
certained  that  a  regular  connection  was  not  being  called  for, 
to  “  refuse  to  carry  on  further  conversation  with  the  person 
calling  ”.  The  first  violation  of  this  rule  was  to  subject  the 
offender  to  an  admonition;  for  the  second  offense  she  was 
liable  to  four  weeks’  suspension  from  duty  without  pay;  and 
for  the  third  offense  she  was  to  be  dismissed.  In  his  letter  of 
instructions  by  which  this  new  rule  was  promulgated,  Mr. 
Bryan  called  attention  to  the  fact  that,  in  addition  to  other 
objections  urged  against  the  disseminating  of  information 
by  the  telephone  exchange,  there  was  the  fact  that  such  dis- 

1  Testimony,  etc.,  op.  cit.  p.  101.  *  Ibid.,  p.  103. 


TELEPHONE  FRANCHISE  REGULATIONS.  303 

semination  “  came  in  direct  competition  with  those  who  have, 
I  understand,  devoted  considerable  money  and  time  to  the 
establishment  of  a  bureau  or  bureaus  through  which  the  pub¬ 
lic,  by  means  of  its  or  their  publications  or  otherwise,  may 
legitimately  and  properly  receive  such  information  to  which 
these  instructions  relate,  and  such  competition  is  undesirable 
from  every  point  of  view  ”. 

In  regard  to  the  rule  that  the  use  of  the  telephone  should 
be  confined  to  the  subscriber,  Mr.  Bryan  was  asked  as  to  what 
limitations  were,  in  practice,  imposed  upon  subscribers.  He 
replied  that  the  company  construed  the  rule  as  meaning  just 
what  it  said,  “  that  when  a  man  subscribes  for  his  telephone, 
it  shall  be  for  the  sole  use  of  the  subscriber,  and  on  his  busi¬ 
ness  ”.1  When  asked  what  measures  the  company  took  to 
enforce  the  rule,  he  said: 

“We  have  a  monitor  for  every  8  or  10  operators,  in  order  to  see  that 
they  do  not  indulge  in  talking  with  the  grocery  clerks — that  they 
attend  to  their  business,  in  other  words  ;  and  if  in  the  process  of  this 
monitoring  it  is  founjl  that  it  is  the  habit  of  a  man  having  a  telephone 
to  bring  in  a  great  many  persons  to  use  it,  it  is  very  easily  picked  up  in 
that  way.  *  *  *  *  We  notify  the  party  that  his  contract  stipulations 
are  being  disregarded.” 

151.  Competition  to  reduce  rates— Indianapolis. — There 
are  two  telephone  companies  operating  in  Indianapolis,  hav¬ 
ing  substantially  an  equal  number  of  subscribers.  The  Cen¬ 
tral  Union  Telephone  Company,  representing  the  Bell  in¬ 
terests,  charges  $54  a  year  for  a  direct  line  business  telephone, 
service  unlimited,  and  $24  a  year  for  a  similar  residence  line.2 
The  Indianapolis  Telephone  Company,  which  is  the  Inde¬ 
pendent  company,  charges  $40  a  year  for  an  unlimited  serv¬ 
ice  on  a  direct  business  line  within  a  two-mile  radius  of  the 
center  of  the  city,  and  $1.50  additional  for  each  quarter  of  a 
mile  beyond  that  distance.  The  residence  rate  within  the 
two-mile  radius  is  the  same  as  that  charged  by  the  Bell 
company,  $24  a  year;  and  for  residences  outside  this  limit 
an  additional  charge  is  made  the  same  as  in  the  case  of 
business  telephones. 

The  original  franchise  of  the  Central  Union  Telephone 
Company  was  granted  February  17,  1879,  to  the  Indiana 
District  Telephone  Company.3  This  company  was  authorized 

1  Testimony,  etc.,  op.  cit .,  p.  128. 

*  “  Telephone  Rates  and  Service  ”,  Report  of  Chicago  Council  Committee,  Sept. 
8, 1907,  op.  cit..  p.  191. 

*  Laws  and  Ordinances,  City  of  Indianapolis,  Revision  of  1904,  p.  1129. 


304 


MUNICIPAL  FRANCHISES. 


to  attach  its  telephone  lines  to  the  poles  of  the  city’s  fire 
alarm  system,  on  condition  that  it  would  keep  the  poles  in 
repair  and  not  interfere  with  their  use  by  the  city.  The 
company  was  also  authorized  to  erect  and  maintain  poles  for 
its  own  use  under  certain  specified  restrictions,  and  was  re¬ 
quired  to  furnish  the  city,  free  of  charge,  22  telephones,  11 
call  bells  and  the  necessary  wooden  brackets,  for  the  purpose 
of  connecting  the  several  engine  and  reel  houses  by  telephone. 
The  city  reserved  the  right  to  repeal  the  ordinance  at  any 
time.  As  a  matter  of  fact,  the  ordinance  was  repealed  in  1886, 
and  the  company  was  notified  to  remove  all  its  wires  from 
the  streets  of  the  city  and  to  take  down  its  poles  within  14 
days,  on  penalty  of  having  these  fixtures  removed  by  the 
street  commissioner.1  A  few  weeks  later,  however,  a  petition 
was  presented  to  the  council,  signed  by  numerous  citizens,  re¬ 
questing  that  the  company  should  not  be  required  to  remove 
its  fixtures  until  such  time  as  a  new  company  should  have 
been  given  a  franchise  and  have  had  time  to  construct  a  plant 
and  furnish  service.2  The  petition  was  granted  on  condi¬ 
tion  that  no  more  poles  should  be  erected  or  wires  strung 
by  the  company.  The  very  next  year,  1887,  a  resolution  was 
adopted,  authorizing  the  company  to  maintain  its  existing 
fixtures  and  to  establish  such  new  poles  and  lines  as  might  be 
necessary  to  furnish  telephone  service  to  the  citizens.3  Fi¬ 
nally,  in  1896,  an  entirely  new  franchise  was  granted  to  this 
company  on  certain  conditions.4  The  company  agreed  to 
place  its  wires  underground  within  a  prescribed  district.  On 
all  poles  which  the  company  maintained  in  the  streets,  the 
city  was  to  have  the  exclusive  use  of  the  top  cross-arm  for 
police  and  fire  alarm  purposes.  In  each  of  the  company’s 
conduits,  one  duct  was  reserved  for  the  city’s  use,  and  the 
company  assumed  the  obligation  to  put  in,  connect  tip  and 
keep  in  repair,  the  city’s  wires  required  for  use  in  this  duct. 
The  company  agreed  to  pay  $6,000  a  year  for  its  franchise 
privileges.  It  also  agreed  that  its  rates  for  telephone  service 
should  not  exceed  the  rates  “  which  it  charges  in  other  cities 
within  its  territory  of  the  same  size  and  population,  for  sim¬ 
ilar  service,  unless  by  special  request  of  persons,  firms  or 
other  corporations  desiring  to  be  furnished  special  service”. 

1  Laws  and  Ordinances,  City  of  Indianapolis,  Revision  of  1904,  op.  cit .,  p.  1131. 

2  Ibid.,  same  reference. 

*  Ibid.,  p.  1132. 


4  Ibid.,  same  reference. 


TELEPHONE  FRANCHISE  REGULATIONS. 


305 


It  should  be  explained  that  the  Central  Union  Telephone 
Company  operates  practically  throughout  the  states  of  In¬ 
diana,  Ohio  and  Illinois,  with  the  exception  of  the  cities  of 
Cincinnati,  Cleveland  and  Chicago.  The  franchise  contained 
detailed  provisions  bringing  the  company’s  operations  in  the 
streets  under  the  supervision  of  the  city  authorities  and  guard¬ 
ing  the  city  and  the  other  occupants  of  the  streets  against 
damages  caused  by  the  company’s  activities.  The  company 
was  required  to  give  a  bond  in  the  amount  of  $50,000,  which 
was  to  be  released  after  two  years  in  case  the  company  had 
placed  its  wires  underground  within  the  prescribed  district. 
Thereafter  the  company  was  to  furnish  a  new  bond  in  the 
sum  of  $15,000,  conditioned  on  the  faithful  performance  of 
its  obligations  under  the  franchise. 

An  Independent  franchise  was  granted  by  the  City  of  In¬ 
dianapolis,  May  20,  1898,  to  the  New  Telephone  Company  for 
a  period  of  25  years.1  It  was  expressly  stipulated  that  the 
company,  “  recognizing  and  conceding  that  such  limitation  of 
time  as  herein  expressed  is  one  of  the  essential  and  governing 
conditions  of  this  contract,  does  hereby  bind  itself,  its  suc¬ 
cessors  and  assigns,  that  at  the  expiration  of  said  period  of 
time  it  will  yield  possession  of  the  streets,  alleys,  avenues 
and  public  grounds  of  said  city,  and  cease  the  operation 
of  said  telephone  plant  and  system,  and  from  thenceforward 
will  make  no  claim  of  any  kind  to  exercise  any  right  under 
the  grant  herein  made,  whether  such  claim  be  founded  upon 
any  charter  or  corporate  rights  claimed,  or  otherwise,  and  any 
rights  which  might  be  claimed  by  said  company  to  hold  be¬ 
yond  said  period  of  time,  under  the  statute  under  which 
it  was  incorporated,  are  herein  and  hereby  expressly  waived 
The  city  reserved  the  right,  at  any  time  not  less  than  3 
months  or  more  than  6  months  before  the  expiration  of  the 
franchise,  in  case  a  new  franchise  had  not  already  been 
granted  to  the  company,  to  purchase  all  the  company’s  tan¬ 
gible  property  constituting  its  telephone  plant,  by  payment  of 
the  fair  market  value  of  such  property.  In  case  the  city 
and  the  company  were  unable  to  agree  as  to  the  price,  the 
value  was  to  be  determined  by  arbitration,  but  the  reserved 
right  of  purchase  was  not  to  be  construed  as  binding  the  city 
to  purchase  the  property  or  any  part  of  it  unless  it  elected 

1  Laws  and  Ordinances,  op.  cit p.  1142. 


306 


MUNICIPAL  FRANCHISES. 


to  have  the  property  appraised.  If  the  franchise  was  not 
renewed  and  the  city  did  not  care  to  exercise  its  option  of 
purchase,  the  right  was  reserved  to  grant  a  franchise  to  an¬ 
other  company  upon  such  terms  as  might  be  fixed  in  a  con¬ 
tract  for  a  period  commencing  on  the  date  of  the  expiration 
of  the  old  franchise.  In  such  case  the  new  company  would 
be  authorized  to  purchase  the  telephone  plant  on  the  same 
conditions  as  those  under  which  the  city  might  purchase  it. 
If,  at  the  end  of  the  25  years,  the  city  had  not  purchased  the 
plant  and  the  plant  had  not  been  sold  to  another  company 
having  a  franchise  and  the  franchise  to  the  old  company  had 
not  been  renewed,  then  the  city  was  required  to  offer  by  pub¬ 
lic  advertisement  a  new  franchise  for  the  operation  of  the 
plant  for  a  term  of  years  not  exceeding  25,  such  grant  to  be 
awarded  to  the  responsible  bidder  offering  the  most  favorable 
terms  for  the  city  and  its  citizens  and  agreeing  to  purchase 
the  old  company’s  plant  at  its  fair  cash  value,  as  determined 
by  arbitration.  If  no  satisfactory  bid  was  received  for  the 
franchise,  the  city  would  then  have  the  right,  without  any 
process  of  law,  to  take  possession  of  the  streets  and  other  pub¬ 
lic  places  occupied  by  the  company’s  telephone  systems,  and 
the  company  would  have  three  months  in  which  to  remove  its 
tangible  property.  As  in  the  franchise  granted  two  years 
earlier  to  the  Central  Union  Telephone  Company,  the  city 
provided  for  underground  construction  within  a  prescribed 
area,  for  the  free  use  of  one  cross-arm  and  one  duct  by  the 
city,  for  the  supervision  of  street  work,  for  indemnity  against 
damages,  and  for  other  matters  of  detail. 

The  company  agreed  to  connect  the  lines  of  its  telephone 
system  with  the  line  or  lines  operated  by  such  other  telephone 
companies  doing  business  outside  the  city  as  should  make  ap¬ 
plication  therefor  and  construct  their  lines  to  the  corporate 
limits  of  the  city.  All  such  connections  were  to  be  made  on 
reasonable  terms  and  without  discrimination,  on  condition 
that  all  such  outside  lines  should  agree  to  receive  and  trans¬ 
mit  on  similar  terms  all  messages  in  which  this  company  was 
interested.  It  was  stated  as  understood  between  the  parties 
to  the  agreement,  that  connection  with  these  outside  tele¬ 
phone  lines  in  the  State  of  Indiana  was  one  of  the  essential 
conditions  on  which  the  franchise  "was  granted.  In  case  of 
disagreement  as  to  terms  between  this  company  and  outside 


TELEPHONE  FRANCHISE  REGULATIONS. 


307 


companies,  their  differences  were  to  be  promptly  submitted  to 
arbitration.  It  was  “  distinctly  understood ”  by  both  part¬ 
ies  to  the  agreement  “  that  the  principal  consideration  for  the 
granting  of  the  franchise  and  privileges  conferred  herein,  is 
and  will  be  the  securing  of  a  reduction  of  telephone  rates 
to  the  citizens  of  said  city  *  *  *  and  the  maintenance  of 
such  reduced  rates  during  the  period  of  time  covered  by  this 
contract It  was  accordingly  agreed  that  if  the  company 
should  at  any  time  consolidate  with  or  be  absorbed  by  any 
competing  telephone  company,  or  if  any  such  company  should 
come  to  own  or  control,  directly  or  indirectly,  one-third  or 
more  of  this  company’s  stock,  or  in  case  there  should  be  any 
combination,  collusion  or  cooperation  between  this  company 
and  any  competing  company,  or  between  the  stockholders  or 
officers  of  such  companies,  to  increase  the  price  of  telephone 
service  beyond  the  rates  fixed  in  this  franchise,  or  to  modify, 
change,  evade  or  nullify  any  of  the  terms  and  provisions  of 
this  contract,  then  the  franchise  was  to  be  forfeited  and  the 
city  was  to  have  the  right  to  take  possession  of  the  company’s 
tangible  property,  the  value  of  which  was  agreed  upon  in  ad¬ 
vance  as  the  true  amount  of  liquidated  damages  which  the 
city  would  sustain  by  any  such  violation  of  the  franchise. 
The  company,  however,  was  authorized  to  consolidate  with 
any  competing  company  with  the  consent  of  the  city,  on 
condition  that  the  other  company  should  bind  itself  to  reduce 
telephone  rates  to  its  patrons  to  the  rates  fixed  in  this  ordi¬ 
nance,  and  to  maintain  and  operate  all  its  lines  and  furnish 
good  service  at  such  rates  to  all  its  patrons  at  the  time  of  the 
consolidation  of  the  companies  and  to  all  other  persons  in  the 
city  residing  on  or  near  its  lines,  and  on  the  further  condi¬ 
tion  that  it  would  carry  out  this  company’s  obligations  as  to 
connections  with  outside  telephone  systems  and  perform  this 
company’s  contracts  with  all  such  independent  telephone  com¬ 
panies.  The  capital  stock  of  the  company  was  not  to  be  in¬ 
creased  beyond  $400,000,  nor  diminished  during  the  period  of 
the  franchise,  without  the  express  consent  of  the  city.  The 
company  agreed  to  furnish  first-class  telephone  service  of  the 
best  and  most  modern  character  at  the  rates  which  were  de¬ 
scribed  at  the  beginning  of  this  section  as  being  charged  by 
the  Indianapolis  Telephone  Company.  The  company  agreed 
to  pay  $6,000  a  year  for  its  franchise  and,  after  it  had  6,000 


308 


MUNICIPAL  FRANCHISES. 


telephones  in  operation  to  pay  the  city  $2  a  year  for  each 
additional  telephone  in  use. 

In  regard  to  the  extension  of  service,  it  was  provided  that 
when  the  request  of  any  number  of  citizens  desiring  tele¬ 
phone  service  was  refused  by  the  company,  they  might  appeal 
to  the  board  of  public  works,  which  must  set  a  time  and  hear 
the  claims  of  both  sides  in  regard  to  the  matter.  If,  after 
this  hearing,  the  board  was  of  the  opinion  that  the  request 
of  the  petitioners  for  service  should  be  granted,  it  was  au¬ 
thorized  to  order  the  company  to  install  the  necessary  tele¬ 
phones  and  to  furnish  service  at  the  rates  fixed  in  the  ordi¬ 
nance.  A  penalty  of  $10  a  day  for  failure  to  obey  any  such 
order  was  agreed  upon  as  liquidated  damages. 

This  franchise  was  transferred  by  the  New  Telephone  Com¬ 
pany  to  the  Indianapolis  Telephone  Company  in  1904,  and 
the  city  gave  its  consent  to  the  increase  of  the  latter  com¬ 
pany’s  capital  stock  to  $1,200, 000. 1 

152.  Competition  secured  through  the  Initiative — Portland, 
Oregon.  — In  1902  all  the  old  franchises  of  the  Pacific  States 
Telephone  and  Telegraph  Company,  the  Bell  company  which 
at  that  time  held  a  monopoly  of  the  telephone  business  in 
Portland,  were  repealed  and  a  new  franchise  was  granted  to 
run  for  a  period  of  25  years.2  Provision  was  made  that 
within  a  certain  district  the  overhead  wires  were  to  be  removed 
within  5  years,  and  in  a  certain  other  district  within  10  years, 
and  elsewhere  from  time  to  time  as  might  be  required  by  the 
city  authorities  in  the  exercise  of  the  police  power.  The 
company  agreed  that  upon  90  days’  notice  it  would  furnish, 
equip  and  install,  for  the  use  of  the  city,  and  maintain  and 
keep  in  working  order  throughout  the  period  of  the  grant, 
free  of  charge,  a  telephone  fire  alarm  system  to  consist  of  a 
switchboard  placed  in  the  headquarters  engine  house,  with 
metallic  circuits  running  to  each  of  the  city’s  engine  houses 
and  fire  stations,  there  to  be  connected  with  long  distance 
telephone  sets.  The  company  also  was  to  furnish,  free  of 
charge,  two  trunk-lines  between  its  central  switchboard  and 
the  switchboard  of  this  telephone  fire  alarm  system,  so  that 
communication  could  be  had  between  the  company’s  exchange 
and  the  fire  alarm  exchange.  Until  the  city  demanded  this 
special  fire  alarm  system,  the  company  was  to  furnish,  free 

1  Laws  and  Ordinances,  op.  cit..  p,  1157. 

*  Revised  Ordinances  of  the  City  of  Portland,  Jan.  2,  1805,  p.  146. 


TELEPHONE  FRANCHISE  REGULATIONS.  3’09 

> 

of  charge,  one  telephone  for  each  engine  house,  to  be  con¬ 
nected  by  individual  metallic  circuits  with  the  company’s 
general  telephone  system.  The  city  reserved  the  right  to 
place  its  fire  and  police  telegraph  and  water  department  tele¬ 
phone  wires  on  the  company’s  poles,  and  the  company  was 
required  to  provide  and  maintain  for  the  city,  free  of  charge, 
such  wires  in  its  underground  conduits  as  might  be  necessary 
for  these  purposes.  The  company  also  agreed  to  furnish, 
without  charge,  25  telephones  to  be  used  in  connection  with 
the  city’s  police  telephone  system,  and  to  continue  to  furnish 
14  telephones  in  various  enumerated  city  offices,  which  it 
was  at  that  time  furnishing  voluntarily.  It  was  provided, 
however,  that  the  city  should  not  connect  any  of  the  tele¬ 
phones  furnished  by  this  company  with  any  telephones,  tele¬ 
phone  lines  or  apparatus  of  any  other  telephone  company. 
As  compensation  for  the  franchise,  the  company  agreed  to 
pay  $1,000  a  year  in  addition  to  the  quarterly  license  fee 
of  $75,  which  it  was  already  paying.  It  was  also  provided 
that  the  company  should  not  charge  or  collect  any  higher 
rental  for  telephones  than  the  maximum  rates  being  col¬ 
lected  at  the  time  the  franchise  was  granted.  It  was  expressly 
stipulated  that  the  franchise  should  not  be  construed  as  lim¬ 
iting  the  right  of  the  city  to  make  other  grants  to  other  per¬ 
sons  or  corporations  for  similar  purposes  in  the  same  streets. 

Under  the  Initiative  provisions  of  the  Portland  charter  a 
new  franchise  for  an  automatic  telephone  system  was  sub¬ 
mitted  to  the  people  at  the  June  election  in  1905  and 
ratified  by  them.  This  franchise  is  of  particular  interest 
because  it  was  secured  by  means  of  petition  and  popular  vote 
and  was  at  the  time  criticised  as  being  a  more  liberal  grant 
than  could  have  been  secured  from  the  city  council.  One  of 
the  conditions  of  the  new  franchise  was  that  the  telephone 
system  constructed  in  accordance  with  its  terms  should  be 
what  is  known  as  the  automatic  system,  similar  in  kind  to 
the  system  then  in  operation  in  San  Diego,  California.  This 
franchise  contained  the  usual  provisions  in  regard  to  under¬ 
ground  construction  and  the  safeguarding  of  the  city’s  in¬ 
terests  in  connection  with  all  street  work.  It  also  contained 
a  provision  that  the  grantee  should  maintain  his  poles,  con¬ 
duits,  plant,  system  and  exchange  in  good  order  and  repair 
and  render  efficient  service  throughout  the  entire  term  of  the 


310 


MUNICIPAL,  FRANCHISES. 


grant,  on  pain  of  the  forfeiture  of  the  franchise.  The 
grantee  was  not  permitted,  without  the  consent  of  the  city 
by  ordinance,  to  sell  or  transfer  his  property  or  privileges 
to  any  other  person  or  corporation  engaged  in  the  telephone 
business,  and  was  forbidden  to  enter  into  any  combination, 
directly  or  indirectly,  with  any  other  person  or  corporation 
operating  within  the  city,  to  fix  the  rates  to  be  charged  for 
telephone  service. 

The  immediate  grantee  in  this  franchise  was  an  individual, 
and  he  was  authorized  to  transfer  his  rights  to  a  company 
organized  under  the  laws  of  the  state  for  carrying  on  a  gen¬ 
eral  telephone  and  telegraph  business,  on  condition  that  notice 
of  such  assignment  should  be  filed  by  him  with  the  city 
auditor  within  60  days  after  its  execution.  It  was  a  condi¬ 
tion  of  the  franchise  that  all  telephone  lines  constructed  by 
the  grantee  should  have  complete  copper  metallic  circuits  and 
that  its  conduit  system  should  be  constructed  of  such  size 
and  capacity  as  to  accommodate  wires  and  conductors  suffi¬ 
cient  to  provide  for  10,000  telephones.  The  rates  fixed  in  the 
ordinance  were  $6.25  per  month  for  a  business  telephone  and 
$2.75  per  month  for  a  residence  telephone,  so  long  as  the 
number  of  telephones  comprised  in  the  grantee’s  system  did 
not  exceed  10,000.  When  the  number  of  subscribers  had 
increased  beyond  the  limit,  the  rate  charged  might  be  in¬ 
creased  $6  a  year  for  each  additional  thousand,  but  in  no 
case  was  the  business  rate  to  exceed  $8  a  month  or  $96  a 
year,  or  the  residence  rate  to  exceed  $4  a.  month  or  $48  a 
year.  Moreover,  a  discount  of  25  cents  per  month  for  prompt 
payment  was  allowed.  The  grantee 'agreed  to  pay  1  per  cent 
of  his  gross  receipts  into  the  city  treasury,  with  a  fixed  min¬ 
imum  of  $1,000  a  year  for  the  years  1908  to  1914,  of  $2,000 
a  year  for  the  years  1915  to  1926,  and  of  $3‘,000  a  year  for 
the  years  1927  to  1929.  The  grantee  also  agreed  to  install, 
equip  and  maintain  a  police  patrol  telephone  system,  with  a 
suitable  switchboard  in  the  police  station  and  telephones  to 
be  placed  in  boxes  on  his  poles  or  at  places  designated  by  the 
city.  The  grantee  was  to  install  75  of  these  telephones  as 
soon  as  he  had  his  poles  erected  and  his  wires  laid,  and  there¬ 
after  was  to  install  35  telephones  a  year  until  he  had  installed 
a  total  of  300.  It  was  provided  that  5  telephones  might  be 
placed  on  one  line,  and  the  city  was  to  supply  the  boxes.  The 


TELEPHONE  FRANCHISE  REGULATIONS. 


311 


entire  police  telephone  system  was  to  become  the  property  of 
the  city  on  the  termination,  forfeiture  or  abandonment  of 
the  enterprise.  Provision  was  also  mad.e  for  free  telephone 
service  for  the  fire  department  and  for  the  general  city 
offices.  It  was  provided  that  the  grantee  should  keep,  at  all 
times  during  the  period  of  the  franchise,  full  and  correct 
books  of  account  and  make  quarterly  reports  to  the  city 
auditor.  These  reports  were  to  contain  “  an  accurate  state¬ 
ment  in  summarized  form,  as  well  as  in  detail,  of  all  receipts 
from  all  sources,  and  all  expenditures  for  all  purposes,  to¬ 
gether  with  a  full  statement  of  all  assets  and  debts  ”,  and 
other  information  in  regard  to  the  costs  and  profits  of  the 
service  and  the  financial  condition  of  the  grantee ;  and  the  city 
auditor  was  authorized  to  examine  the  grantee’s  books  and 
vouchers  at  all  reasonable  hours.  No  charge  could  be  made 
for  any  telephone  service  until  at  least  3,000  telephones  had 
been  installed  and  were  in  actual  operation.  It  was  agreed 
that  $50,000  should  be  expended  under  the  grant  within  one 
year,  $250,000  within  two  years,  and  $500,000  within  three 
years.  The  entire  cost  of  the  plant,  when  fully  completed, 
was  estimated  at  $1,000,000.  The  automatic  system  could 
be  changed  for  a  manual  system  only  with  the  city’s  consent. 
It  was  expressly  stipulated  that  the  rights  conferred  by  this 
franchise  should  not  operate  in  any  way  as  an  enhancement 
of  the  grantee’s  property  or  be  an  asset  or  item  of  ownership 
in  its  appraisal  in  the  event  that  the  city  should  ever  acquire 
the  plant  by  purchase.  It  was  stipulated  that  the  franchise 
should  terminate  in  25  years,  and  that  the  city  should  at  that 
time  have  the  right  to  purchase  the  grantee’s  property  used 
in  connection  with  the  telephone  business  at  a  fair  valuation. 
This  valuation  was  not  to  include  any  franchise  value,  but 
was  to  include  “  good  will  of  every  kind  and  description 
No  purchase  could  be  effected  by  the  city  without  ratification 
by  a  majority  of  the  electors;  and  if  it  was  necessary  to 
issue  bonds  for  the  purchase  of  the  property,  then  a  two-thirds 
affirmative  vote  of  the  electors  was  required. 

If  the  city  should  elect  not  to  purchase  the  plant  and  should 
instead  grant  a  new  or  additional  franchise  or  an  extension 
of  the  old  franchise,  then  the  grantee  under  the  old  franchise* 
was  to  have  “  the  first  and  preferential  right  to  take  and  re-**, 
ceive  such  new,  additional  or  extended  franchise  ”.  If,  how- 


312 


MUNICIPAL  FRANCHISES. 


ever,  the  present  grantee  declined  to  take  the  new  franchise 
and  it  should  be  granted  by  the  city  to  any  other  individual 
or  corporation,  then  such  new  grantee,  in  addition  to  the 
compensation  it  might  be  required  to  pay  the  city,  would  also 
be  required  to  purchase  the  original  grantee’s  plant.  It  was 
expressly  stipulated  that,  before  the  original  grantee,  his  suc¬ 
cessors  or  assigns,  should  be  deprived  of  the  right  to  “  pos¬ 
sess,  maintain,  operate  and  enjoy”  the  plant  and  property, 
the  new  grantee  must  take  over  the  property  at  a  fair  valua¬ 
tion  to  be  arrived  at  in  the  same  way  as  if  the  city  were  the 
purchaser. 

It  is  apparent  from  the  purchase  clause  of  this  franchise 
that  the  grantee’s  property  is  amply  protected  against  con¬ 
fiscation  by  the  city.  While  the  franchise  purports  to  be  for 
25  years  only,  the  city  must  itself  purchase  the  entire  plant, 
including  good  will,  or  find  somebody  else  who  is  willing  to 
do  so,  before  this  grantee  can  be  stopped  from  continuing  to 
operate.  It  may  be  noted  also  that  the  rate  of  $75  a  year  for 
business  telephones,  fixed  in  this  franchise,  is  nearly  double 
the  $40  rate  fixed  by  the  Independent  telephone  franchise  in 
Indianapolis,  a  city  about  twice  as  large  as  Portland.  It  is 
true  that  under  the  Indianapolis  franchise  the  $40  rate  ap¬ 
plies  only  within  the  two-mile  radius ;  but  in  Portland,  on  the 
other  hand,  the  $75  rate  applies  only  as  long  as  the  number 
of  telephones  connected  with  the  exchange  is  less  than  10,000. 
In  Grand  Eapids,  Michigan,  a  city  of  about  the  same  size  as 
Portland,  the  automatic  telephone  system  has  been  in  opera¬ 
tion  for  several  years  by  an  Independent  telephone  company, 
and  the  rate  charged  for  business  telephones  is  $36  a  year 
for  unlimited  service. 

153.  Franchise  conditions  approved  by  the  Probate  Court— 
Toledo.  — In  February,  1901,  the  Toledo  Home  Telephone 
Company  applied  to  the  city  council  of  Toledo  for  authority 
to  use  the  streets  of  the  city  for  telephone  purposes,  and 
submitted  with  its  application  a  draft  of  a  franchise  which  it 
asked  the  common  council  to  adopt.  The  council,  however, 
did  not  grant  the  franchise  or  pass  upon  the  company’s  appli¬ 
cation  within  a  reasonable  time.  Accordingly,  the  company 
applied  to  the  Probate  Court  of  Lucas  County  for  a  deter¬ 
mination  of  the  terms  and  conditions  upon  which  it  might 
operate  within  the  city  limits.  The  Probate  Judge  granted 


TELEPHONE  FRANCHISE  REGULATIONS. 


313 


the  company’s  petition  and  awarded  a  franchise  which  was 
accepted  by  the  company  on  July  16,  190 1.1  Under  this  grant 
the  company  was  authorized  to  construct  a  telephone  system 
consisting  of  wires,  underground  conduits,  poles,  switch¬ 
boards,  and  other  necessary  appliances,  and  operate  this  sys¬ 
tem  in  perpetuity.  Construction  work  in  the  streets  was  to 
be  under  the  reasonable  supervision  of  the  city  engineer,  and 
the  wires  were  to  be  placed  underground  within  a  specified 
district  at  the  heart  of  the  city.  The  company  was  required, 
within  90  days  after  the  acceptance  of  its  franchise,  to  file 
a  detailed  map,  plan  and  specifications  for  its  underground 
construction  with  the  Probate  Court,  which,  if  approved  by 
the  court,  were  to  be  afterward  filed  with  the  city  engineer. 
The  company  was  required  to  commence  work  under  this 
plan  within  90  days  after  the  last  filing  and  complete  the 
work  not  later  than  December  31,  1903,  unless  delayed  by 
litigation  carried  on  in  good  faith.  The  company  was  also 

1  Special  Ordinances  of  the  City  of  Toledo,  p.  686  In  response  to  an  inquiry 
about  this  franchise,  Mr.  Charles  S.  Northrop,  City  Solicitor  of  Toledo,  in  a  letter 
dated  March  16,  1909,  made  the  following  statement : 

“  The  franchise  was  granted  by  the  State  of  Ohio  by  virtue  of  Section  3461 
(Revised  Statutes),  which  in  form  applies  only  to  magnetic  telegraph  companies 
but  which  has  since  been  made  applicable  to  telephone  companies.  This  section 
provides  as  follows : 

“  *  When  any  lands  authorized  to  be  appropriated  to  the  use  of  a  company  are 
subject  to  the  easement  of  a  street,  alley,  public  way,  or  other  public  use,  within 
the  limits  of  any  city  or  village,  the  mode  of  use  shall  be  such  as  shall  be  agreed 
upon  between  the  municipalauthorities  of  the  city  or  village  and  the  company: 
and  if  they  cannot  agree,  or  the  municipal  authorities  unreasonably  delay  to  enter 
into  any  agreement,  the  Probate  Court  of  the  county,  in  a  proceeding  instituted 
for  the  purpose,  shall  direct  in  what  mode  such  telegraph  line  shall  be  constructed 
along  such  street,  alley,  or  public  Avay,  so  as  not  to  incommode  the  public  in  the 
use  of  the  same  ;  but  nothing  in  this  section  shall  be  so  construed  as  to  authorize 
any  municipal  corporation  to  demand  or  receive  any  compensation  for  the  use  of 
a  street,  alley,  or  public  way,  beyond  what  may  be  necessary  to  restore  the  pave¬ 
ment  to  its  former  state  of  usefulness.’ 

”  The  city  having  declined  to  grant  a  franchise  on  the  terms  demanded  by  the 
telephone  company,  the  company  filed  its  application  in  the  Probate  Court  for 
this  county  setting  forth  its  inability  to  agree  with  the  city  and  asked  to  have  the 
Probate  Court  determine  by  what  mode  the  telephone  company  should  construct 
its  wires  along  the  streets  of  the  city,  and  in  its  application  agreed  to  a  certain 
scale  of  prices.  The  application,  of  course,  was  granted  and  the  agreement  as  to 
the  prices  carried  into  the  decree. 

“  Section  3461  was  declared  by  theSupreme  Court  of  Ohio  to  be  unconstitutional, 
in  Zanesville  vs.  Telephone  and  Telegraph  Company,  63  Ohio  State,  442.  However, 
on  rehearing  the  Supreme  Court  held  the  statute  to  be  constitutional.  See  same 
title,  64  Ohio  State,  67.  *  *  *  * 

“  After  the  telephone  company  had  operated  for  some  little  time  in  accordance 
with  the  scale  of  prices  fixed  in  the  order  of  the  Probate  Court,  the  Supreme 
Court  in  the  Findlay  case  held  that  the  Probate  Court  was  without  power  to 
make  an  order  relative  to  the  prices  that  might  be  charged  for  telephone  service. 

“  Macklin  vs.  Home  Telephone  Co.,  24  O.  C.  C.  446  :  70  Ohio  State,  507. 

“  The  decision  in  the  Supreme  Court  was  without  report  and  the  title  in  the 
Court  of  last  resort  was  City  of. Findlay  vs.  Home  Telephone  Company. 

“  After  that  case  had  been  decided  in  the  Supreme  Court  the  Toledo  Home 
Telephone  Company  increased  its  rates.  Its  right  so  to  do  was  questioned  by 
the  city,  but  was  sustained  by  the  Circuit  Court  in  the  case  of  State  of  Ohio,  ex 
rel.,  against  the  Toledo  Home  Telephone  Company,  and  by  the  Supreme  Court  in 
72  Ohio  State,  60.” 


314 


MUNICIPAL  FRANCHISES. 


required  to  extend  its  underground  system  from  time  to  time, 
as  other  telegraph  and  telephone  companies  should  be  re¬ 
quired  by  the  city  authorities  to  do  so.  Outside  of  the  under¬ 
ground  district,  the  company  was  authorized  to  set  poles  in 
the  public  ways,  but  wherever  practicable  they  were  to  be 
placed  in  alleys  and  wherever  practicable  in  front  of  the 
dividing  line  between  lots.  The  company  was  required  to 
furnish  and  maintain  at  least  one  duct  of  sufficient  size  and 
capacity  for  the  use  of  the  city’s  fire  alarm  and  police  patrol 
wires.  The  company  was  also  required  to  provide  space  on 
the  top  cross-arm  of  its  poles  for  the  city’s  wires,  free  of 
charge.  The  usual  requirements  in  regard  to  the  restoration 
of  the  streets  and  the  filing  of  bonds,  w~ere  inserted  in  the 
grant.  It  was  specifically  provided  that  the  company  should 
proceed  diligently  to  construct  and  equip  within  the  city  “  a 
first-class  modern  telephone  plant,  in  character  and  extent 
sufficient  to  furnish  all  subscribers  ”  a  good  first-class  tele¬ 
phone  service.  The  company  was  to  have  at  least  3,000  sub¬ 
scribers  connected  with  its  system  by  December  31,  1903. 

The  rates  fixed  in  this  franchise  were  $44  per  year  for  a 
business  telephone  on  an  individual  wire  with  metallic  cir¬ 
cuit  within  the  city  limits,  subject  to  a  reduction  of  $1  per 
quarter  if  paid  in  advance,  and  $26  per  year  for  each  resi¬ 
dence  telephone  on  an  individual  wire  with  metallic  circuit 
within  the  city  limits,  subject  to  a  reduction  of  50  cents 
per  quarter  if  paid  in  advance.  The  rate  for  extension  tele¬ 
phones  was  not  to  exceed  $6  each  per  annum,  nor  for  install¬ 
ing  extension  bells  $5  each.  Twenty-one  sets  of  telephones 
were  to  be  furnished,  free  of  charge,  to  various  city  offices 
enumerated  in  the  grant ;  and  for  use  in  connection  with  the 
city’s  fire  alarm  exchange  system  the  company  was  to  furnish 
one  battery  transmitter  or  microphone  and  one  telephone  for 
each  engine  house,  provided  that  the  total  number  of  such 
transmitters  and  telephones  should  not  exceed  25.  For  any 
additional  telephones  the  city  was  to  receive  a  discount  of 
25  per  cent  from  the  regular  rates  charged  for  business  pur¬ 
poses.  It  was  provided  that  the  telephone  equipment  should 
be  “  of  the  best,  most  modern  and  improved  central  energy 
type  ”,  and  that  the  service  was  to  be  first-class  in  all  respects, 
continuous  and  unlimited  for  24  hour3  in  every  day,  except 
when  interrupted  by  unavoidable  causes.  The  company  was 


TELEPHONE  FRANCHISE  REGULATIONS. 


315 


required  to  connect  its  lines  as  far  as  possible  with  any  and 
all  lines  and  systems  outside  of  the  city,  in  the  states  of  Ohio, 
Indiana  and  Michigan,  on  reasonable  terms  and  without  dis¬ 
crimination,  on  condition  that  the  owners  of  the  outside 
lines  desiring  such  communication  should  agree  to  furnish 
first-class  service  and  to  receive  and  transmit  on  like  terms  all 
of  the  company’s  messages.  The  company  was  forbidden  to 
sell  its  franchise,  directly  or  indirectly,  to  or  for  the  benefit 
of  the  owner  of  any  competing  telephone  system,  on  penalty 
of  the  forfeiture  of  its  rights.  The  company  was  required  to 
deposit  with  the  judge,  within  10  days  after  the  date  of  the 
order  of  the  Probate  Court  granting  the  franchise  a  certi¬ 
fied  check  for  $5,000,  payable  to  the  order  of  the  city  treas¬ 
urer.  If  the  company  thereafter  failed  to  execute  the  bonds 
required  or  to  deposit  with  the  court  the  detailed  map  and 
specifications  of  its  proposed  underground  work,  this  check 
was  to  be  forfeited  to  the  city.  Upon  the  petition  of  the 
company  and  the  city,  the  court  fixed  the  amount  of  the  com¬ 
pensation  to  be  paid  by  the  company  to  the  city  for  the  res¬ 
toration  of  pavements  interfered  with  in  the  construction  of 
the  company’s  plant,  at  50  cents  for  every  pole  set. 

154.  Local  and  long  distance  Independent  franchises  in  the 
Twin  Cities  —Minneapolis  and  St.  Paul.  — In  Minneapolis  and 
St.  Paul  there  is  a  dual  system  of  telephones.  Substantially 
identical  franchises  were  granted  by  both  cities  in  1898  to 
the  Independent  companies.  The  Minnesota  Central  Tele¬ 
phone  Company  received  a  franchise  for  maintaining  “  pub¬ 
lic  pay  stations  and  instruments  for  private  use,  for  connec¬ 
tion  with  long  distance  telephone  systems  ”.1  Under  its 
franchises  this  company  was  not  permitted  to  transfer  its 
stock  or  any  part  of  it,  or  its  rights  or  property,  to  any  other 
telephone  company  operating  in  Minneapolis  or  St.  Paul,  or 
to  consolidate  with  any  such  company,  without  the  consent 
of  the  city  council,  expressed  by  resolution  passed  by  a  two- 
thirds  vote. 

Under  these  franchises  each  city  reserved  to  itself  the  right 
to  purchase  the  company’s  system  within  its  limits  at  any 
time  after  five  years  from  the  date  of  the  acceptance  of  the 
franchise.  The  price  was  not  to  exceed  “  its  actual  and  neces¬ 
sary  cost  of  construction,  less  any  depreciation  in  the  value 

1  Minneapolis  City  Charter  and  Ordinances,  1905,  p.  604;  Compiled  Ordinances  of 
City  of  St.  Paul,  1907,  p.  1110. 


316 


MUNICIPAL,  FRANCHISES. 


thereof,  by  reason  of  wear  and  tear  or  from  any  other  cause 
whatsoever”.  No  value  whatever  was  to  be  placed  upon  the 
franchise.  If  the  city  and  the  company  were  unable  to  agree 
on  the  purchase  price,  its  value  was  to  be  ascertained  by  ar¬ 
bitrators,  two  of  whom  were  to  be  appointed  by  the  city 
council  and  two  by  the  company.  If  these  failed  to  agree, 
they  were  to  call  in  a  fifth.  If  the  first  four  could  not  agree 
on  a  fifth  arbitrator,  then  the  full  bench  of  the  Minnesota 
judicial  district  in  which  the  city  is  located  was  to  select 
him  upon  the  application  of  either  party.  The  city  was  not 
to  be  bound  to  purchase  the  telephone  and  conduit  system 
at  the  price  fixed  by  the  board  of  arbitration,  unless  it  chose 
to  do  so,  and  it  was  to  have  one  year  within  which  to  make 
the  required  payment.  It  was  provided  that  the  company 
should  not  bond,  mortgage  or  in  any  way  encumber  its  tele¬ 
phone  and  conduit  system  located  within  either  city,  for 
more  than  75  per  cent  of  the  amount  actually  and  necessarily 
used  in  their  construction.  In  case  of  municipal  purchase 
the  city  had  the  right  to  take  over  the  sj^stem  subject  to  such 
encumbrances,  after  deducting  the  amount  thereof  from  the 
price  to  be  paid.  The  company  was  required  to  furnish  the 
city  an  itemized  statement  sworn  to  by  its  officers,  showing 
the  cost  of  construction,  and  for  the  purpose  of  verifying 
any  such  statement  the  company’s  books  were  to  be  open  to 
the  inspection  of  any  officer  or  person  designated  by  the  city 
council  for  that  purpose.  The  company  was  required  to  pay 
to  the  city  five  per  cent  of  its  gross  earnings  from  tolls  re¬ 
ceived  within  the  city  limits  and  also  from  tolls  received 
outside  the  city  on  account  of  messages  originating  within 
the  city.  As  further  compensation,  the  city  was  to  have  the 
right  to  attach  its  fire  alarm  and  police  wires  to  the  upper 
cross-arm  of  the  company’s  poles.  All  poles  were  to  be  not 
less  than  50  feet  in  length  and  8  inches  in  diameter  at  the 
top.  It  was  also  stipulated  that  all  of  the  company’s  aerial 
and  underground  conductors  entering  any  building,  must 
be  provided,  near  the  point  of  entrance  to  the  building,  with 
“  some  approved  protective  device  which  will  operate  to  shunt 
the  instruments  in  case  of  a  dangerous  rise  in  potential  and 
will  open  and  arrest  any  abnormal  current  flow  ”.  If  the  pro¬ 
tector  should  be  placed  within  the  building,  the  wires  of  the 
circuit  from  the  support  on  the  outside  of  the  building  to 


TELEPHONE  FRANCHISE  REGULATIONS.  Z17 

the  protective  device,  were  to  be  of  such  insulation  and  in¬ 
stalled  in  such  manner  as  required  by  the  ordinances  of  the 
city  for  low  potential  electric  light  and  power  service  wires. 

In  the  franchise  granted  by  St.  Paul  there  was  a  special 
provision  limiting  the  term  of  the  grant  to  25  years  and 
providing  that  the  company’s  rates  should  not  exceed  10 
cents  for  a  5  minute  talk  between  the  two  cities,  and  requir¬ 
ing  the  company  to  make  connection  with  any  and  all  local 
telephone  exchanges  in  St.  Paul  upon  equal  terms,  so  long 
as  the  company  itself  did  not  operate  a  telephone  exchange 
in  the  city.  It  was  provided,  however,  that  this  clause  should 
not  require  the  company  to  make  any  connection  with  the 
Northwestern  telephone  exchange,  which  is  the  Bell  Company 
operating  in  the  Twin  Cities. 

Local  telephone  franchises  were  received  from  the  two 
cities  at  about  the  same  time  by  the  Mississippi  Valley  Tele¬ 
phone  Company.1  Under  these  franchises  the  maximum  rates 
in  either  city  were  to  be  $48  per  annum  for  a  business  tele¬ 
phone  located  within  two  miles  of  the  post-office,  and  $30  per 
annum  for  a  residence  telephone  within  the  same  limits.  An 
additional  rental  of  25  cents  per  month  was  permitted  for 
each  half-mile  beyond  the  two-mile  limit.  For  telephones 
furnished  the  city  the  rates  were  not  to  exceed  the  following: 

Three  telephones  with  switch-board  service,  $2.50  per  month 
each. 

Thirty-one  telephones  with  switch-board  service,  $1.50  per 
month  each. 

Sixty  telephones  for  police  2  calls,  with  care  and  mainte¬ 
nance  $2.50  per  year  each. 

The  right  was  expressly  reserved  to  the  city,  to  increase 
the  number  of  telephones  used  by  it,  according  to  this  sched¬ 
ule  of  prices.  It  was  also  provided  that  if  the  city  should 
purchase  and  use  its  own  telephones,  connected  with  its  own 
wires  or  connected  with  wires  furnished  by  the  company,  such 
fire  alarm  and  police  service  as  might  be  required  to  be  con¬ 
nected  with  the  general  telephone  system  of  the  company 
should  be  furnished  free  of  cost.  It  was  provided  that  all 
telephones  connected  with  the  company’s  exchange  should  be 
“  connected  only  by  metallic  circuits,  and  no  grounded  wire 

1  Minneapolis  City  Charter  and  Ordinances,  op.  cit.,  p.  608  ;  Compiled  Ordinances 
of  City  of  St.  Paul,  op.  cit.,  p.  1120. 

*  In  the  St.  Paul  ordinance  the  word  “  public  ”  is  used  instead  of  “  police.” 


318 


MUNICIPAL  FRANCHISES. 


or  common  return  circuits,  so-called  ”,  should  be  employed. 
It  was  also  provided  that  “  what  is  known  as  party  lines 
shall,  in  no  case,  be  used  or  operated  under  this  ordinance,  nor 
shall  more  than  one  set  of  telephone  instruments  be  attached 
to  any  circuit,  *except  when  specially  authorized  ”  by  the  city 
council.  The  St.  Paul  franchise,  however,  was  amended  two 
years  later  by  adding  the  provision  that  “  two  sets  of  tele¬ 
phone  instruments  may  be  attached  to  any  one  circuit  when 
both  such  telephone  instruments  are  used  in  residences,  and 
party  lines  may  be  established  to  such  extent  ”.1  The  com¬ 
pany  was  required  to  furnish  the  cities  space  upon  its  poles 
for  fire  alarm  and  police  wires  and,  at  its  own  expense,  to 
string  on  its  poles  and  draw  into  its  conduits  any  such  wires 
required  by  the  cities.  The  company  was  not  required,  how¬ 
ever,  to  permit,  on  its  poles  or  in  its  conduits,  any  wires 
carrying  a  stronger  electrical  current  than  could  be  safely 
carried  without  impairing  the  efficiency  of  the  company’s 
service.  But  any  question  of  interference  arising  in  this 
connection  was  to  be  decided  by  the  city  council.  There  were 
provisions  forbidding  the  transfer  of  the  company’s  stock 
and  reserving  to  the  cities  the  right  of  purchase,  similar  to 
the  provisions  in  the  long  distance  telephone  franchises  al¬ 
ready  described,  except  that  the  option  might  be  exercised 
at  any  time  after  four  years  instead  of  five.  In  the  case  of 
the  local  company,  however,  it  was  also  provided  that  none 
of  its  directors  should  hold  stock  in  any  other  telephone  com¬ 
pany  operating  a  general  telephone  exchange  in  the  city. 
Similar  provisions  were  also  included  in  regard  to  the  bond¬ 
ing  of  the  company’s  property,  the  payment  of  a  gross  re¬ 
ceipts  tax,  and  the  inspection  of  the  company’s  books.  There 
was  a  further  provision,  however,  that  the  company  should 
not  be  required  to  pay  the  5  per  cent  gross  earnings  tax  on 
a  number  of  business  telephones  and  a  number  of  residence 
telephones  equal  to  the  number  of  such  telephones  in  use  by 
actual  subscribers  to  all  opposition  telephone  companies  not 
required  to  pay  a  gross  earnings  tax  to  the  cities. 

155.  Telephones  in  a  city  of  15,000— Ann  Arbor,  Michigan. 
— The  New  State  Telephone  Company,  representing  the  Bell 
interests,  operates  in  the  City  of  Ann  Arbor  under  a  franchise 
approved  May  7,  1897. 2  This  franchise  contains  provisions 

1  Compiled  Ordinances  of  St.  Paul.  op.  cit .,  p.  1123. 

1  Charter  and  Ordinances  of  the  city  of  Ann  Arbor,  1908,  p.  207. 


TELEPHONE  FRANCHISE  REGULATIONS. 


319 


in  considerable  detail  in  regard  to  the  setting  of  poles,  string¬ 
ing  of  wires  and  other  street  work,  and  provides  that  the  com¬ 
pany  shall  furnish  the  city  10  telephones  free  and  10  other 
telephones  at  one-half  the  regular  rates.  The  company  must 
move  any  of  the  20  telephones,  without  cost  to  the  city,  when 
required  to  do  so  by  the  common  council;  but  may  not  be 
required  to  move  them  more  than  once  a  year.  The  maximum 
rates  permitted  under  this  franchise  are  $24  a  year  for  busi¬ 
ness  places  and  offices,  and  $18  a  year  for  residences.  The 
company  is  required  to  furnish  a  bond  in  the  sum  of  $2,500 
to  protect  the  city  from  damage  suits  growing  out  of  the  com¬ 
pany’s  negligence,  and  the  city  reserves  the  right  to  amend  or 
alter  the  ordinance  at  any  time  and  to  make  other  and  further 
rules  and  regulations,  as  public  convenience  and  necessity 
may  require,  concerning  the  extension,  operation  or  construc¬ 
tion  of  the  company’s  plant  and  apparatus.  The  franchise 
may  be  forfeited  by  a  two-thirds  vote  of  the  council  in  case 
the  company  fails  or  refuses  to  perform  its  obligations.  The 
company  may  also  be  required  to  remove  its  poles  and  wires 
from  any  street  in  the  city,  on  condition  that  this  requirement 
shall  be  uniform  to  all  companies  operating  in  the  city.  Pro¬ 
vision  is  made  that  if  the  company  consolidates  with  any 
other  person,  company  or  corporation,  its  franchises  shall  be 
null  and  void.  It  is  also  provided  that  when  the  company 
shall  extend  its  lines  to  Ypsilanti,  a  city  about  8  miles  distant, 
and  open  an  exchange  there,  communication  shall  be  fur¬ 
nished,  without  extra  charge,  between  the  company’s  sub¬ 
scribers  in  the  two  cities.  It  is  also  provided  that  when  the 
company  shall  extend  its  lines  to  Detroit,  distant  about  40 
miles,  communication  may  be  had  between  the  two  cities  at 
the  rate  of  10  cents  for  a  5-minute  conversation. 

Another  franchise  was  granted  by  the  City  of  'Ann  Arbor 
on  June  10,  1902,  and  amended  the  following  year.1  This 
grant  was  made  to  individuals  and  was  afterward  transferred 
to  the  Home  Telephone  Company,  an  Independent  concern. 
It  was  stipulated  that  the  life  of  the  grant  should  be  30  years 
unless  sooner  terminated  by  purchase  by  the  city.  Provision 
was  made  that  on  certain  enumerated  streets  the  company’s 
lines  should  be  laid  in  underground  conduits.  The  rates  to 
be  charged  under  this  franchise  were  the  same  as  those  named 

1  Charter  and  Ordinances,  op.  cit.,  p.  228. 


320 


MUNICIPAL,  FRANCHISES. 


in  the  preceding  one,  $24  per  annum  for  a  business  telephone 
and  $18  per  annum  for  a  residence  telephone;  but  these  rates 
were  to  be  granted  on  condition  that  the  subscriber  should 
enter  into  a  written  contract  to  use  his  telephone  for  three 
years  or  more.  In  the  absence  of  such  a  contract,  the  grantees 
were  authorized  to  charge  $2  more  per  year  for  either  a 
business  or  a  residence  telephone.  It  was  also  provided  that 
no  telephone  should  be  required  to  be  installed  for  less  than 
one  quarter’s  rental,  and  the  grantees  were  authorized  to 
charge  not  exceeding  $1  a  month  extra  for  long  distance 
telephones  on  full  copper  metallic  circuits.  The  grantees 
were  also  authorized  to  rent  out  space  in  their  conduits,  on 
condition  that  such  conduits  should  not  be  used  for  wires 
transmitting  stronger  electric  currents  than  are  required  for 
telephones.  The  city  reserved  to  itself  the  right  to  use  one 
duct  in  all  of  the  grantees’  conduits,  free  of  charge,  and  the 
grantees  agreed  to  furnish  the  city  22  free  telephones  and 
any  additional  telephones  required  for  city  use  at  20  per  cent 
discount  from  the  regular  rates.  Upon  giving  at  least  six 
months’  notice,  the  city  was  to  have  the  right  to  purchase  the 
grantees’  telephone  system  at  the  end  of  10  years  from  the 
date  of  the  ordinance  or  at  the  end  of  any  5-year  period  there¬ 
after.  In  case  of  purchase  the  city  was  to  pay  the  actual 
value  of  the  plant,  “  which  shall  not  be  less  than  the  actual 
cost  of  construction  of  such  plant  ”.  It  was  provided  that 
neither  this  franchise  nor  any  of  the  rights  and  privileges 
under  it  should  be  sold,  assigned  or  leased  to  any  telephone 
company  then  located  or  doing  business  in  the  city,  “  so  as 
to  in  any  manner  thereby  prevent  or  remove  legitimate 
competition 

156.  Important  points  of  a  telephone  franchise.  — The  tele¬ 
phone  has  come  to  be  second  in  importance  only  to  the  street 
railway  as  a  public  utility.  Although  on  account  of  its  long 
distance  connections  it  is  not  solely  a  local  utility,  neverthe¬ 
less  in  all  cases  where  local  authorities  have  jurisdiction,  the 
terms  and  conditions  of  telephone  franchises  are  of  great 
importance.  Standing  out  as  most  important  of  all  the  prob¬ 
lems  connected  with  a  telephone  franchise  is  the  matter  of 
rates.  While  in  small  towns  a  system  of  flat  rates,  with  a 
proper  differentiation  between  residence  and  business  places, 
may  not  work  substantial  injustice  and  on  account  of  its 


TELEPHONE  FRANCHISE  REGULATIONS.  321 

simplicity  and  convenience  may  be  well  suited  to  the  tastes 
of  the  people,  there  is  a  growing  conviction  that  in  all  im¬ 
portant  cities  telephone  service  should  be  rendered  on  the 
measured  rate  plan.  This  is  true  because  as  cities  increase 
in  size,  the  differences  in  the  amount  of  use  by  the  different 
classes  of  telephone  patrons  become  very  much  more  marked, 
and  also  because  with  the  extension  of  service  to  a  large  ex¬ 
change  the  cost  to  each  subscriber  tends  to  increase  so  that 
unless  measured  rates  are  introduced  no  one  can  have  a 
telephone  even  for  necessary  uses  without  paying  for  it  on 
the  basis  of  a  luxury.  In  large  cities,  the  neighborhood  ex¬ 
change  plan,  coupled  with  an  additional  charge  for  each 
connection  with  the  central  exchange,  is  a  convenient  solu¬ 
tion  of  the  difficulty  for  the  suburban  or  semi-suburban  dis¬ 
tricts.  While  there  is  no  particular  reason  why  the  average 
householder  connected  with  the  central  exchange  of  a  great 
city  should  require  the  use  of  a  telephone  more  frequently 
than  a  subscriber  in  a  small  town,  it  is  desirable  that  every 
patron  of  a  telephone  should  be  able  to  connect,  in  case  of 
need,  with  anyone  else  in  the  same  city  who  has  a  telephone. 

This  leads  us  from  the  problem  of  rates  to  the  problem  of 
competition.  Whatever  may  have  been  the  advantages  to  the 
telephone  business  in  the  recent  past  arising  from  the  rivalry 
of  different  systems  and  different  companies,  it  is  obvious 
from  the  standpoint  of  the  telephone  subscriber  that  the  busi¬ 
ness  should  be  operated  as  a  unit.  It  should  be  frankly 
recognized  in  each  community  that  the  telephone  company  is 
a  public  servant  delegated  to  perform  a  monopoly  function 
subject  to  the  control  of  the  public  authorities  and  bound  to 
give  good  service  and  adequate  extensions  at  reasonable  rates, 
or  else  to  go  out  of  the  business  and  let  somebody  else  take 
it  up  who  will  do  so. 

The  advantages  of  the  automatic  system,  at  least  in  cities 
of  moderate  size,  are  sufficiently  marked  so  that  a  franchise 
for  any  considerable  period  of  years  ought  to  reserve  the  right 
to  the  public  authorities  to  require  the  installation  of  this 
system  if  upon  careful  investigation  it  is  deemed  for  the 
public  interest  to  do  so. 

Another  matter  of  importance  is  a  requirement  that  the 
local  telephone  compan}^  shall  provide  connections  with  toll 
lines  so  that  the  local  service  shall  be  properly  supplemented 


322 


MUNICIPAL  FRANCHISES. 


with  long  distance  service.  While  the  number  of  long  dis¬ 
tance  messages  is  small  compared  with  the  number  of  local 
messages,  still  the  efficiency  of  a  local  system  is  largely  de¬ 
pendent  upon  proper  interurban  connections. 

It  is  important  in  a  telephone  franchise  to  insert  specific 
requirements  in  regard  to  the  publication  of  the  telephone 
directory  and  the  separate  listings  which  shall  be  permitted 
to  a  subscriber  either  free  or  for  extra  compensation.  It  is 
important  that  a  telephone  directory  should  have  not  only 
an  alphabetical  list  of  all  subscribers,  but  also  a  numerical 
list. 

It  is  also  to  be  desired  that  each  subscriber  should  be  at  lib¬ 
erty  to  purchase  standard  telephone  instruments  in  the  open 
market  for  use  on  his  own  premises  to  be  connected  with  the 
lines  of  the  telephone  company. 

While  it  is  desirable  that  rates  should  be  simplified  as  much 
as  possible,  it  seems  necessary  that  special  provisions  should 
be  made  for  special  classes  of  service  such  as  private  branch 
exchanges,  private  lines,  extension  telephones,  neighborhood 
exchanges,  etc. 

In  common  with  telegraph  and  electric  light  franchises 
the  franchise  of  a  telephone  company  should  reserve  to  the 
local  authorities  adequate  control  in  the  matter  of  the  con¬ 
struction  of  pole  lines  and  conduits  and  the  proper  insula¬ 
tion  of  wires.  As  with  all  other  public  utilities  the  principal 
desideratum  in  the  case  of  the  telephone  is  to  reserve  to  the 
city  full  control  of  the  streets,  not  only  on  account  of  the 
necessities  of  ordinary  traffic  but  also  in  order  that  provision 
may  be  made  from  time  to  time  for  the  symmetrical  develop¬ 
ment  of  all  public  utilities.  In  the  meantime  the  immediate 
requirement  is  for  adequate  service  at  reasonable  rates  so  ad¬ 
justed  that  the  telephone  shall  not  become  a  factor  in  the 
strengthening  of  privileged  classes  of  the  community,  but 
shall  rather  be  a  democratic  instrument  of  development 
helping  to  equalize  conditions  and  to  open  to  all  citizens  alike 
the  advantages  of  intercommunication. 

A  telephone  franchise,  like  any  other,  should  reserve  to  the 
city  the  right  to  purchase  the  plant,  and  should  make  the 
status  of  the  company’s  physical  property  and  franchise  rights, 
at  the  expiration  of  the  grant,  perfectly  clear  and  definite. 


CHAPTER  X. 


THE  TELEGRAPH  AND  THE  CONDITIONS  IMPOSED  UPON 

IT  BY  LOCAL  AUTHORITIES. 

157.  History  and  importance  of  the  tele-  163.  General  regulations  for  poles  and 

graph  as  a  public  utility.  wires— Somerville,  Mass. 

158.  Peculiarities  of  the  telegraph  in  its  164.  Combinations  forbidden— Indianap- 

relation  to  municipalities.  olis  ;  Toledo  ;  Newport,  Ky. ;  Min- 

159.  Usual  characteristics  of  a  telegraph  neapolis. 

franchise.  165.  Free  service  to  city— Milwaukee  ; 

160.  Special  franchises  subject  to  gen-  Springfield,  Ill. ;  Cedar  Rapids. 

eral  law  and  general  ordinances —  166.  Miscellaneous  regulations  —  Nash- 
Erie,  Harrisburg  and  Lancaster.  ville ;  South  Bend ;  Portland, 

161.  Detailed  regulations  by  ordinance —  Ore. 

Newark.  167.  An  up-to-date  telegraph  franchise- 

162.  Licenses,  pole  taxes,  etc.— Jersey  Chicago. 

City  and  Trenton. 

157-  History  and  importance  of  the  telegraph  as  a  pub¬ 
lic  utility. — The  telegraph  was  invented  about  the  middle  of 
the  nineteenth  century.  The  Western  Union  Telegraph 
Company  was  incorporated  in  1851  under  the  name  of  the 
“  New  York  and  Mississippi  Yalley  Printing  Telegraph  Com¬ 
pany”,  and  assumed  its  present  name  in  1856.  In  the  early 
years  of  the  telegraph  business  a  great  many  companies  were 
organized  in  different  parts  of  the  country  for  carrying  it 
on.  Most  of  these  companies  were,  however,  gradually  ab¬ 
sorbed  by  the  Western  Union  Telegraph  Company,  which 
held  a  practical  monopoly  until  the  Postal  Telegraph  Cable 
Company  came  into  the  field.  At  the  present  time  practically 
the  entire  telegraph  business  of  the  country  is  controlled  by 
these  two  companies  and  their  subsidiaries.  Bulletin  Xo  17 
of  the  Bureau  of  the  Census  gives  statistics  for  telegraph 
systems  in  1902,  and  compares  the  status  of  the  industry  at 
that  time  with  its  status  as  shown  by  the  census  report  for 
1880.1  The  77  commercial  telegraph  systems  in  operation 
in  1880  had  dwindled  to  25  in  1902,  although  the  mileage  of 
wires  had  increased  from  less  than  300,000  to  more  than 
1,300,000 ;  the  number  of  messages  from  less  than  32,000,000 

*  *'  Telephones  and  Telegraphs,  1902,”  op.  cit .,  pp.  29  et  seq. 

323 


324 


MUNICIPAL  FRANCHISES. 


to  nearly  92,000,000;  and  the  outstanding  stock  and  bonds 
from  $77,000,000  to  approximately  $163,000,000.  The  total 
revenue  of  the  business  had  increased  from  less  than 
$17,000,000  to  nearly  $41,000,000,  although  the  average  rate 
per  message  had  decreased  from  43  cents  in  1880  to  31  cents 
in  1902.  In  the  latter  year  there  were  upwards  of  27,000 
telegraph  offices  and  about  the  same  number  of  employes, 
including  13,000  operators.  The  total  assets  of  the  com¬ 
mercial  telegraph  systems  in  1902  were  reported  as  amount¬ 
ing  to  $195,000,000,  including  about  $26,000,000  of  stocks 
and  bonds  in  other  companies.  Of  the  1,307,000  miles  of 
wire  in  operation,  98.5  per  cent  was  overhead,  leaving  only 
17,265  miles  underground.  Besides  the  commercial  land 
telegraphs,  there  were  20  ocean  cables  with  a  total  length  of 
16,677  miles.1 

In  addition  to  the  commercial  systems,  there  was  a  very 
large  mileage  of  telegraph  lines  owned  and  operated  by  rail- 
\vay  companies.  Indeed,  the  number  of  railway  companies 
reporting  to  the  Census  Bureau  the  maintenance  of  telegraph 
and  telephone  lines  in  connection  with  the  transportation 
business,  was  no  less  than  684.  A  total  of  1,127,000  miles 
of  wire  was  operated  along  the  rights  of  way  of  these  com¬ 
panies.  But  of  this  total,  only  21.5  per  cent  was  owned  by 
the  railway  companies  themselves.  The  Bureau  of  the 
Census  was  unable  to  eliminate  the  duplications  of  mileage 
reported  by  the  railway  companies  on  the  one  hand  and  by 
the  commercial  telegraph  companies  on  the  other.  The 
railway  companies  reported  31,278  telegraph  offices,  with 
over  30,000  operators.  An  interesting  item  of  the  somewhat 
meager  statistics  collected  by  the  Census  Bureau,  is  the  com¬ 
parison  of  the  amount  of  copper  wire  and  of  iron  wire  in 
use  by  the  commercial  systems.  There  were  only  333,000 
miles  of  copper  wire,  as  against  864,000  miles  of  iron  wire, 
owned  by  these  companies.  Inasmuch  as  iron  wire  is  much 

1  The  Preliminary  Report  on  Telegraphs  for  1907,  issued  by  the  Bureau  of  the 
Census,  Feb.  13,  1909.  shows  a  considerable  growth  in  the  business  during  the  pre¬ 
ceding  five  years.  The  number  of  companies  or  systems  remained  the  same,  but 
the  miles  of  single  wire  exclusive  of  ocean  cable  had  increased  tol,578,000,  or  neariy 
20  per  cent ;  the  miles  of  ocean  cable  had  increased  to  46.301,  or  177.7  per  cent.  The 
total  number  of  messages  sent  was  a  little  short  of  104,000,000 or  13.2  per  cent  more 
than  in  1902  ;  while  the  total  income  was  $51, 583, 000,  which  represented  an  increase 
of  26  per  cent  in  the  five  years.  Outstanding  capitalization,  including  stocks  and 
bonds,  had  increased  35.2  percent,  to  $220,293,000;  while  the  average  number  of 
employees  had  increased  only  1.5  per  cent,  as  against  an  increase  of  18.4  per  cent 
in  the  aggregate  amount  of  salaries  and  wages  paid. 


TELEGRAPH  FRANCHISE  CONDITIONS. 


325 


cheaper  and  less  durable  than  copper  wire,  it  is  possible  that 
the  preponderance  in  the  use  of  the  former  explains  to  a 
considerable  extent  the  profitableness  of  the  telegraph  com¬ 
panies’  business  until  recent  years  and  the  apparently  troub¬ 
lous  times  to  which  they  are  coming.  The  reconstruction 
of  the  bulk  of  their  lines  with  more  expensive  material  when 
the  money  that  should  have  been  charged  off  for  deprecia¬ 
tion  of  the  original  plant  has  been  paid  out  in  dividends, 
will  be  likely  to  put  a  severe  test  on  their  financial  ability. 

But  financial  improvidence  is  not  the  only  trouble  that 
has  come  upon  the  telegraph  business  in  recent  years.  The 
enormous  development  of  the  use  of  the  telephone,  both  for 
long  distance  and  for  local  business,  has  undoubtedly  re¬ 
sulted  in  a  serious  check  upon  the  growth  of  the  telegraph  as 
a  public  utility.  As  already  described  in  the  preceding  chap¬ 
ter,  the  Western  Union  Telegraph  Company  in  1879  entered 
into  an  alliance  with  the  Bell  telephone  interests,  by  the 
terms  of  which  the  Western  Union  received  a  bounty  on  all 
Bell  telephones  in  use  as  a  consideration  for  keeping  out  of 
the  telephone  business.  The  Western  Union  was  also  desig¬ 
nated  by  the  parent  company  of  the  Bell  interests  as  the 
only  telegraph  company  with  which  the  Bell  licensees  were 
permitted  and  required  to  make  connections  for  the  purpose 
of  receiving  and  delivering  messages.  The  enormous  de¬ 
velopment  of  the  Independent  movement  in  the  telephone 
business  and  the  advent  of  competition  in  the  telegraph  field 
itself,  have  rendered  the  ancient  alliance  less  profitable  and 
less  dangerous  to  the  public  interests  than  it  was  formerly. 

At  the  present  time  the  Western  Union  Telegraph  Com-, 
pany  has  capital  stock  to  the  amount  of  about  $100,000,000 
outstanding  and  almost  $40,000,000  of  bonds.  The  local 
telegraph  business  of  the  Western  Union  is  handled  through 
separate  companies.  The  American  District  Telegraph  Com¬ 
pany  of  New  York  handles  the  Western  Union  messages  in 
New  York  City,  while  the  American  District  Telegraph 
Company  of  New  Jersey,  organized  in  1901,  has  consolidated 
all  of  the  Western  Union’s  local  subsidiaries  outside  of  New 
York  City.  The  Postal  Telegraph  Cable  Company  and  its 
subsidiaries  have  been  brought  under  the  control  of  The 
Mackay  Companies,  a  voluntary  association  formed  in 
Boston,  December  19,  1903,  which  now  owns  stock  in  up- 


326 


MUNICIPAL  FRANCHISES. 


wards  of  100  different  cable,  telegraph  and  telephone  com¬ 
panies  in  different  parts  of  the  United  States.  The  Mackay 
Companies  has  a  capitalization  of  upwards  of  $90,000,000. 
It  owns  all  of  the  $23,000,000  stock  of  the  old  Commercial 
Cable  Company,  and  there  are  still  outstanding  $20,000,000 
bonds  issued  by  the  latter  company.  The  Mackay  Companies 
is  also  the  largest  stockholder  in  the  American  Telephone 
and  Telegraph  Company.  It  remains  to  be  seen,  how  far  the 
development  of  wireless  telegraphy  will  militate  against  the 
interests  of  the  telegraph  companies  now  in  the  field. 

158.  Peculiarities  of  the  telegraph  in  its  relation  to 
municipalities. —In  many  respects  the  telegraph,  as  a  public 
utility,  bears  a  different  relation  to  the  cities  whose  streets 
it  occupies,  from  that  borne  by  any  other  public  utility. 
In  the  first  place,  the  principal  use  of  the  telegraph  is  for 
long  distance  communication.  It  is,  therefore,  not  only  in- 
terurban,  but  to  a  very  marked  extent  interstate,  and  to  a 
considerable  extent  international,  in  its  operation.  For  this 
reason  the  nature  and  extent  of  the  jurisdiction  which  can 
be  exercised  over  it  by  the  local  authorities,  are  both  limited. 
Furthermore,  the  telegraph  is  in  a  peculiar  way  allied  with 
the  steam  railroads,  both  on  account  of  its  tremendous  im¬ 
portance  as  an  auxiliary  to  the  operation  of  railroad  systems 
and  also  because  railroad  rights  of  way  have  furnished  con¬ 
venient  locations  for  pole  lines  outside  of  the  immediate 
jurisdiction  of  the  public  authorities.  In  the  second  place, 
the  telegraph,  unlike  the  telephone,  is  not  brought  to  the 
door  of  the  individual  patron  by  means  of  an  elaborate  sys¬ 
tem  of  local  wires  and  fixtures.  Messages  are  taken  and  de¬ 
livered  by  the  employes  of  the  company.  Even  where  a  tele¬ 
graph  company  needs  to  establish  pole  lines  or  lines  of 
conduits  in  the  streets,  this  need  does  not  extend  to  all  or  a 
large  proportion  of  the  streets  of  a  city,  but  only  to  such 
few  streets  as  are  required  for  the  purposes  of  one  or  two 
through  lines  and  a  few  branches.  Accordingly,  a  telegraph 
franchise,  like  a  street  railway  franchise,  is  ordinarily 
granted  for  specific  routes.  The  interurban  and  interstate 
nature  of  the  business  has  also  been  generally  recognized  in 
legislation,  so  that  in  many  states  a  telegraph  company  in¬ 
corporated  under  general  laws  has  a  right  from  the  state 
legislature  to  occupy  all  the  necessary  streets  and  highways 


TELEGRAPH  FRANCHISE  CONDITIONS. 


327 


“with  its  fixtures,  subject  only  to  reasonable  regulation  by 
the  local  authorities.  In  these  states  a  city  has  no  au¬ 
thority  to  prevent  telegraph  companies  from  establishing 
their  lines  through  its  streets,  but  usually  the  local  author¬ 
ities  have  the  right  to  specify  the  particular  streets  to  be 
occupied  by  the  company  and  the  particular  locations  of 
poles  or  conduits  in  the  streets.  Another  peculiarity  of  the 
telegraph  in  its  relation  to  municipalities  is  that,  inasmuch 
as  the  service  is  local  only  to  a  limited  extent,  the  local  au¬ 
thority  ordinarily  has  no  power  to  regulate  rates,  and 
maximum  rates  are  seldom  prescribed  in  a  telegraph  fran¬ 
chise.  Some  of  these  peculiarities  are  shared  by  the  tele¬ 
graph  with  the  long  distance  telephone,  especially  those 
arising  from  the  interurban  and  interstate  nature  of  the 
business.  The  public  station  at  which  outgoing  messages  are 
received  and  from  which  incoming  messages  are  delivered 
by  messenger,  is,  however,  a  more  essential  part  of  the  tele¬ 
graph  than  of  the  long  distance  telephone,  because  in  the 
case  of  the  telephone  physical  connection  may  be  made  with 
the  local  telephone  exchange,  so  that  the  patron  of  the  utility 
is  enabled  to  carry  on  his  long  distance  conversations  from 
his  own  house  or  office.  The  telegraph,  on  the  other  hand, 
requiring  as  it  does  an  expert  operator  to  interpret  the  mes¬ 
sage  from  the  wire,  cannot  be  connected  with  a  local  tele¬ 
graph  or  signal  system  with  the  same  result. 

159.  Usual  characteristics  of  a  telegraph  franchise. — In 
view  of  the  peculiarities  of  the  telegraph  business,  as  relat¬ 
ing  to  municipalities,  the  provisions  of  local  telegraph  fran¬ 
chises  are  ordinarily  limited  to  a  comparatively  few  subjects 
of  regulation.  In  common  with  telephone  and  signal  fran¬ 
chises,  there  are  regulations  as  to  the  location,  character  and 
maintenance  of  pole  lines.  There  are  provisions  for  prevent¬ 
ing  interference  with  ordinary  traffic  in  the  streets  and  pro¬ 
viding  for  the  removal  of  poles  and  wires  when  required  by 
the  local  authorities.  In  the  case  of  pole  lines  the  local 
authorities  have  much  more  generally  granted  franchises 
subject  to  repeal  than  in  the  case  of  other  public  utility 
fixtures.  There  is  also  the  usual  provision  that  the  grantee 
must  indemnify  the  city  against  any  damages  for  which  the 
city  may  become  liable  on  account  of  the  obstruction  of  the 
street  or  on  account  of  injury  to  private  property  owners 


328 


MUNICIPAL  FRANCHISES. 


through  the  placing  of  poles,  the  limitation  of  light  and 
access,  and  injury  to  shade  trees.  As  a  general  thing,  a  tele¬ 
graph  franchise  also  provides  that  the  city  shall  have  the  use 
of  the  poles  for  tire  alarm  and  police  telegraph  wires  and 
sometimes  that  the  city’s  call-boxes  may  be  attached  to  the 
poles.  There  is  frequently  also  a  provision  for  the  joint  use 
of  poles  by  different  companies  having  lines  in  the  same 
street.  There  is  occasionally  some  provision  for  free  tele¬ 
graphic  service  to  the  city  and  frequently  a  provision  to  the 
effect  that  the  franchise  shall  become  void  in  case  the  com¬ 
pany  combines  with  its  competitors.  Perhaps  most  impor¬ 
tant  of  all  is  the  provision  that  the  company’s  wires  shall  be 
placed  underground  in  the  business  section  of  the  city  and 
the  reservation  to  the  local  authorities  of  the  right  to  com¬ 
pel  the  grantee  to  place  its  wires  in  conduits  throughout  the 
city  at  any  time  when  the  safety  and  convenience  of  the  pub¬ 
lic  demand  the  removal  of  the  overhead  system.  In  brief, 
the  provisions  of  a  telegraph  franchise  have  to  do  almost 
altogether  with  the  maintenance  of  the  city’s  control  over  the 
structures  in  the  streets. 

160.  Special  franchises  subject  to  general  law  and  gen¬ 
eral  ordinances  —  Erie,  Harrisburg  and  Lancaster. — Under 

the  laws  of  Pennsylvania  a  telegraph  company,  when  prop¬ 
erly  incorporated,  is  authorized  to  construct  its  lines  along 
any  of  the  public  highways  and  across  or  under  any  of  the 
waters  within  the  limits  of  the  state,  by  the  use  of  wires, 
cables,  posts,  piers,  abutments  or  subways,  subject  to  the 
“  reasonable  regulation  ”  of  the  municipalities  through  which 
the  lines  pass.1  It  is  provided,  however,  that  the  companies 
shall  not  incommode  the  use  of  the  streets  or  injuriously  in¬ 
terrupt  the  navigation  of  the  waters:  and  no  telegraph  com¬ 
pany  is  authorized  under  the  general  law  to  construct  a 
bridge  across  any  of  the  Vaters  of  the  state.  It  is  provided 
that  before  the  company  exercises  its  powers,  it  must  apply 
to  the  municipal  authorities  for  permission  to  occupy  the 
particular  streets  it  desires  to  use.  Such  permission  can  be 
given  by  ordinance  only,  and  such  conditions  and  regulations 
may  be  imposed  by  the  municipal  authorities  as  they  deem 
necessary.  The  local  authorities  have  the  power  to  charge 
a  license  fee  against  companies  having  poles,  wires,  conduits 
or  cables  in  the  streets.  This  fee  may  he  imposed,  however, 

1  Digest  of  Laws,  Ordinances  and  Rules,  city  of  Erie,  1907,  Part  I,  p.  230. 


TELEGRAPH  FRANCHISE  CONDITIONS. 


329 


only  as  compensation  for  the  inspection  and  regulation  of 
such  fixtures,  and  in  case  a  company  deems  the  license  fee 
unreasonable,  it  may  have  recourse  to  the  courts.  In  such 
a  case,  after  the  taking  of  evidence,  the  court  is  required  to 
“  determine  the  amount  of  annual  license  fees  which  should 
be  paid  to  said  municipal  corporation  in  order  to  properly 
compensate  it  for  the  necessary  cost  of  the  services  per¬ 
formed,  or  to  be  performed,  by  it,  for  the  inspection  and 
regulation  of  the  poles,  wires,  conduits  or  cables  ”  of  the 
company.1  The  amount  so  fixed  is  the  maximum  which  the 
local  authority  may  charge,  and  this  maximum  continues  un¬ 
til  altered  by  the  court,  and  no  application  for  such  altera¬ 
tion  may  be  made  oftener  than  once  in  two  years.  There  is  a 
special  provision  in  the  general  law  to  the  effect  that  when¬ 
ever  any  wire  or  cable  is  attached  to  any  building  or  land  or 
extends  over  it,  “  no  lapse  of  time  whatever  $hall  raise  a 
presumption,  or  justify  a  prescription  of  any  perpetual  right 
to  such  attachment  or  extension  ”.  There  is  another  pro¬ 
vision  that  owners  of  land  adjoining  streets  where  poles  and 
wires  are  maintained  may,  in  case  of  damage  by  reason  of 
the  cutting  of  trees  in  or  along  the  highway,  petition  the 
courts  and  have  the  amount  of  damages  assessed  by  viewers 
appointed  for  the  purpose.  The  general  law  also  provides 
that  companies  may  enter  into  contracts  for  the  use  of  each 
other’s  fixtures. 

Supplementing  the  general  law  of  the  state,  the  City  of 
Erie  has  a  general  ordinance  governing  the  construction  and 
maintenance  of  poles  and  wires  in  the  streets.2  By  this 
ordinance  it  is  provided  that  permission  to  erect  poles  and 
string  wires  shall  not  be  granted  to  any  person  or  company 
except  by  ordinance.  One  of  the  conditions  of  any  such 
grant  must  be  that  the  city  reserve  to  itself  the  right  to 
place  and  maintain  one  wire  on  any  pole  or  poles  erected  by 
a  grantee,  without  charge.  The  location  of  the  wire  is  to  be 
determined  by  the  chief  engineer  of  the  fire  department ;  but 
when  it  is  “  reasonably  practicable  ”,  the  city  wire  is  to  be 
on  the  top  of  the  poles.  Each  company  is  to  be  responsible 
to  the  city  for  any  damages  which  may  result  from  the  erec¬ 
tion  of  its  structures  in  the  streets;  and  the  construction  of 
such  fixtures,  both  as  to  location  and  as  to  manner  of  erec- 

1  Digest  of  Laws,  etc.,  op.  cit.,  Part  I,  p.  232.  *  Ibid.,  Part  II,  p.  289. 


330 


MUNICIPAL  FRANCHISES. 


tion,  is  to  be  subject  to  the  direction  of  the  proper  municipal 
authorities,  and,  particularly,  the  structures  are  to  be  placed 
in  such  a  way  that  the  wires  will  not  come  in  contact  with 
the  wires  of  the  fire  alarm  telegraph.  A  grant  made  by  the 
city  may  be  revoked  at  any  time;  and,  when  the  grant  is 
revoked,  the  grantee’s  poles  and  wires  must  be  immediately 
removed  from  the  streets.  Whenever  any  company’s  wires 
intersect  or  cross  the  fire  alarm  telegraph  wires,  the  company 
is  required  to  set  a  post  or  pole,  with  cross-arms  at  least  two 
feet  apart,  at  the  point  of  intersection  and  attach  the  differ¬ 
ent  sets  of  wires  to  these  cross-arms  in  such  a  manner  that 
the  wires  cannot  possibly  come  in  contact  with  each  other. 
Wherever  practicable,  the  fire  alarm  wires  are  to  be  placed 
on  the  highest  arm.  No  company  is  authorized  to  place  its 
wires  on  the  city’s  fire  alarm  telegraph  poles  without  the 
written  consent  of  the  chief  engineer  of  the  fire  department. 
When  this  general  ordinance  was  passed,  October  23,  1882, 
a  provision  was  inserted  revoking  all  licenses  for  the  erec¬ 
tion  of  poles  and  wires  theretofore  granted  by  the  city.  It 
was  stipulated,  however,  that  this  revocation  should  not  be 
construed  as  preventing  the  renewal  of  any  such  license  upon 
application  by  the  grantee  and  subject  to  the  conditions  of 
this  ordinance.  By  a  general  ordinance  adopted  in  1897, 
the  city  provided  that  all  poles  erected  by  private  companies 
to  replace  poles  erected  and  owned  by  the  city,  should  be  the 
property  of  the  city.1  This  ordinance  also  provided  that  it 
should  be  unlawful  for  any  person  “  to  post,  tack  or  affix 
any  advertisement  or  sign  on  any  pole  in  the  City  of  Erie, 
which  is  used  or  intended  to  be  used  for  carrying  or  sup¬ 
porting  a  wire  or  wires”. 

Special  permission  was  granted  by  an  ordinance  in  1890 
to  the  Postal  Telegraph  Cable  Company  to  erect  poles  and 
wdres  on  certain  streets  in  the  City  of  Erie,  subject  to  the 
conditions  of  the  general  ordinance  already  described,  “  but 
also  subject  to  the  condition  that  if  the  said  company  ceases 
to  be  a  competing  company,  said  poles  and  wires  shall  be 
removed  from  the  streets  immediately  ”.2 

The  general  ordinance  regulating  the  construction  and 
maintenance  of  poles  and  wires  in  Harrisburg  provides  that 
any  company  authorized  to  maintain  such  fixtures  in  the 

1  Digest  of  Laws,  etc.,  op.  cit.,  Part  II,  p.  291.  *  Ibid.,  Part  II,  p.  221. 


TELEGRAPH  FRANCHISE  CONDITIONS. 


331 


streets  must  secure  a  license  from  the  commissioner  of  high¬ 
ways  for  the  erection  of  any  line  of  poles  and  pay  a  fee  of 
$1  for  each  license  so  obtained.1  The  commissioner  is  re¬ 
quired  to  inspect  all  poles  within  the  city  at  least  once  a 
year  and  to  notify  the  owner  whenever  he  finds  any  pole  de¬ 
fective.  Upon  such  notification,  the  defective  pole  must  be 
replaced  with  a  sound  one  within  48  hours  or  the  owner  will 
be  liable  to  a  fine  of  $5  a  day  during  the  continuance  of  his 
neglect.  It  is  provided  that  every  pole  shall  be  designated 
by  the  name  or  initials  of  the  owner  and  shall  bear  a  dis¬ 
tinctive  number  legibly  marked  with  oil  paint  upon  the  pole 
itself.  The  owner  must  once  each  year  take  out  a  license 
and  pay  a  fee  of  25  cents  for  each  pole.  The  superintendent 
of  the  fire  and  police  alarm  department  is  authorized  to  order 
the  repair  or  removal  of  poles  that  are  in  a  dangerous  con¬ 
dition  and  the  removal  of  “  dead  poles  99  bearing  no  wdres, 
and  of  “  dead  wires  ”. 

Under  the  general  pole  and  wire  ordinance  of  the  City  of 
Lancaster,  it  is  provided  that  the  erection  or  relocation  of 
poles  shall  be  under  the  direction  of  the  street  commissioner 
and  the  street  committee  of  councils,  and  “  the  locating  of 
any  poles  shall  not  be  considered  as  permanent  but  subject 
to  change  by  the  party  by  whom  the  same  shall  be  erected 
as  directed  by  the  street  committee  ”.2  It  is  also  specifically 
provided  “that  the  removal  of  a  pole  shall  mean  the  taking 
of  it  out  of  the  ground,  and  that  no  pole  shall  be  cut  off  and 
the  stump  allowed  to  remain  in  the  ground  ”. 

161.  Detailed  regulations  by  ordinance— Newark. — The 
construction,  maintenance,  operation  and  use  of  telegraph 
and  other  wires  in  the  streets  of  the  City  of  Newark,  are 
regulated  by  an  ordinance  of  the  board  of  street  and  water 
commissioners,  approved  January  2,  1895.3  Under  this 
ordinance  no  poles  of  a  less  height  than  40  feet,  measured 
from  the  surface  of  the  ground,  may  be  placed  in  the  streets ; 
and  no  wires  may  be  attached  to  any  pole  or  cross-arm  at  a 
height  of  less  than  29  feet  from  the  ground.  As  far  as  pos¬ 
sible,  telegraph  and  telephone  wires  belonging  to  the  same 
company  in  the  same  street,  must  be  cabled,  and  the  cables 
be  supported  by  suitable  insulators.  It  was  provided  by  this 

1  City  Digest,  Harrisburg,  1906,  p.  487. 

J  City  Digest,  Lancaster,  1906,  Part  II,  p.  83. 

*  Compilation  of  the  Laws  and  Charters  of  the  corporations  using  the  public 
streets  of  the  city  of  Newark,  1904,  p.  690. 


332 


MUNICIPAL  FRANCHISES. 


ordinance  that  after  the  date  of  its  adoption  not  more  than 
one  line  of  poles  should  be  authorized  to  be  erected  in  any 
street  for  the  use  of  any  kind  of  electric  wires  other  than 
street  railway  wires.  It  was  provided  that  poles  and  wires 
already  erected,  if  not  maintained  in  conformity  with  the 
ordinances  of  the  city,  should,  upon  10  days’  notice  from 
the  superintendent  of  works,  be  removed  by  the  person  or 
company  owning  them,  and  that  all  poles  and  wires  not  in 
use  should  also  be  removed  from  the  streets.  It  was  pro¬ 
vided  that  each  wire  or  cable,  for  its  whole  length  within  the 
city  limits,  should  be  supported  at  a  substantially  uniform 
height  except  where  one  pole  line  crossed  another,  and  at 
such  points  the  height  of  the  wires  was  to  be  determined 
under  the  supervision  of  the  superintendent  of  works.  Cross- 
arms  upon  poles  were  not  to  be  less  than  two  or  more  than 
four  feet  apart,  and  the  poles  were  to  be  placed,  as  far  as 
practicable,  at  uniform  distances  from  each  other,  such  dis¬ 
tances  to  be  not  less  than  75  or  more  than  150  feet.  It 
was  provided  that  the  dip  on  any  horizontal  span  of  wires 
should  not  exceed  14  inches ;  that  all  poles  should  be 
“  straight,  sound  and  free  from  all  imperfection  ” ;  that  each 
pole  should  be  painted  at  least  once  a  year,  and  that  no  poles 
should  be  set  with  a  diameter  at  the  base  exceeding  20  inches, 
except  corner  poles,  which  might  be  24  inches  in  diameter. 

In  cases  where  two  or  more  pole  lines  other  than  street 
railway  pole  lines  already  occupied  the  same  street  at  the 
time  of  the  passage  of  the  ordinance,  the  company  which  had 
first  been  authorized  to  erect  its  poles  was  required  at  once 
to  adjust  its  poles  and  wires  to  the  provisions  of  the  ordi¬ 
nance,  and  thereafter  the  company  next  authorized  was  to 
adjust  its  poles  and  wires  in  like  manner.  The  city  reserved 
the  right,  in  cases  where  the  safety  of  persons  or  property 
required  it,  to  compel  two  or  more  companies  to  remove 
their  separate  and  individual  poles  and  use  one  pole  line, 
the  first  cost  and  the  cost  of  maintenance  of  this  line  to  be 
divided  equitably  between  the  companies.  The  city  also 
reserved  the  right  to  permit  any  other  person  or  company 
having  legal  authority  to  string  wires  for  any  purpose  in  the 
streets,  to  use  one  or  more  cross-arms  on  such  joint  pole 
lines  upon  payment  of  an  equitable  share  of  the  first  cost 
and  cost  of  maintenance.  On  all  poles  used  by  different 


TELEGRAPH  FRANCHISE  CONDITIONS. 


333 


companies,  the  telegraph  and  telephone  wires  were  to  occupy 
the  lower  cross-arm,  and  the  electric  light  and  power  wires 
the  upper  cross-arm.  No  telegraph  wire  strung  upon  poles 
was  to  be  of  a  smaller  diameter  than  eight-thousandths  of  an 
inch,  and  no  such  wire  should  be  carried  from  the  streets  to 
or  across  the  tops  of  buildings  unless  it  was  firmly  supported 
at  a  distance  of  at  least  10  feet  above  such  buildings.  All 
persons,  companies  or  corporations  owning  or  operating  poles 
and  wires  in  the  city  were  required  by  this  ordinance  to  file 
with  the  board  of  street  and  water  commissioners  within 
90  days  “  maps  and  plans  showing  all  such  wires  and  poles, 
the  character  and  quality  of  each  wire,  its  height  above  the 
street  and  the  current  used  thereon,  the  location,  size  and 
character  of  each  pole  and  cross-arm,  and  the  height  of  each 
above  the  street  99 .  Any  poles  or  wires  in  the  streets  not 
shown  upon  this  map  or  plan  were  to  be  removed  at  once 
by  the  superintendent  of  works  at  the  expense  of  their 
owners.  All  poles  and  wires  were  required  to  be  placed  so 
as  to  cause  the  least  possible  obstruction  to  light  and  be  “  of 
the  least  danger  and  obstruction  in  case  of  fire  ” ;  and  their 
erection  and  maintenance  were  to  be  at  all  times  under  the 
direction  of  the  board  of  street  and  water  commissioners  and 
to  the  satisfaction  of  its  superintendent  of  works.  For  pur¬ 
poses  of  identification,  all  poles  were  to  be  branded  by  their 
owners. 

There  are  many  special  ordinances  and  resolutions  of  the 
City  of  Newark  by  which  locations  have  been  granted  from 
time  to  time  to  various  telegraph  companies.  As  far  back 
as  1865,  the  Insulated  Lines  Telegraph  Company  received 
permission  to  erect  a  telegraph  line  along  certain  streets  on 
condition  that  the  poles  should  be  “  not  less  than  30  feet 
high,  measuring  from  the  curb,  straight  and  well  trimmed, 
and  painted  with  two  coats  of  white  lead  "A  The  company 
was  to  repaint  its  poles  when  directed  to  do  so  by  the  com¬ 
mon  council,  and  was  to  allow  the  city  to  use  them  without 
expense  “  for  a  fire  alarm  and  police  telegraph  99 ,  Four  years 
later,  in  1869,  the  Eastern  Telegraph  Company  petitioned 
the  city  council  of  Newark  for  permission  to  build  and  main¬ 
tain  its  lines  through  the  city,  “  using  choice  cedar  poles 
from  North  Carolina  ”.2  This  petition  was  referred  to  the 
street  committee,  “  with  power 99 . 

1  Compilation  of  the  Laws  and  Charters,  etc.,  op.  cit.,  p.  703.  *  Ibid.,  p.  701. 


334 


MUNICIPAL  FRANCHISES. 


In  1879  a  location  was  granted  to  the  American  Union 
Telegraph  Company,  but  the  grant  was  made  expressly  sub¬ 
ject  to  the  provisions  of  the  state  law  requiring  that  the 
company  should  first  obtain  “  the  consent  in  writing  of  the 
owners  of  the  soil”.1  Under  a  grant  made  to  the  American 
Rapid  Telegraph  Company  in  1881,  the  company  wras  re¬ 
quired  to  enter  into  a  written  agreement  to  furnish  and 
place,  at  its  own  cost,  upon  its  poles  a  wfire  stretching  from 
the  city  limits  to  the  corner  of  Broad  and  Market  streets, 
for  the  use  of  the  city  fire  alarm  telegraph,  and  to  maintain 
this  wire  in  good  working  order.2  The  company  was  also  to 
give  the  mayor  free  use  of  its  line  throughout  its  entire 
length  for  the  transmission  of  messages  relating  to  city  busi¬ 
ness. 

In  1894  the  Western  Union  Telegraph  Company  received 
permission,  by  a  special  ordinance  of  the  board  of  street  and 
water  commissioners,  to  place  its  wires  underground  through 
certain  streets  of  the  city.3  Among  other  provisions  govern¬ 
ing  the  construction  of  the  necessary  conduits,  there  was  one 
requiring  the  company,  after  it  had  replaced  any  pavement 
disturbed  by  its  construction  or  repair  work,  to  maintain  it 
in  as  good  condition  as  the  surrounding  pavement  until  the 
street  was  repaved.  The  conduits  were  to  be  made  of  iron 
pipe  and  to  be  laid  not  less  than  18  inches  beneath  the  sur¬ 
face  of  the  street  and  not  less  than  one  foot  outside  of  the 
curb  line.  They  were  not  to  occupy  a  space  exceeding  one 
foot  in  width  and  three  feet  in  depth  except  wffiere  necessary 
to  avoid  obstructions.  The  manholes  were  to  be  constructed 
so  as  not  to  interfere  with  traffic  along  the  street  and  were 
not  to  be  placed  at  the  intersection  of  streets  except  where 
a  branch  line  of  conduit  separated  from  a  main  line,  or  the 
main  line  changed  its  direction. 

162.  Licenses,  pole  taxes,  etc.— Jersey  City  and  Trenton.— 
The  woes  of  the  terminal  city,  which  is  mainly  a  convenient 
place  for  great  transportation  lines  to  pass  through,  were 
faintly  reflected  in  an  ordinance  adopted  by  Jersey  City  in 
1881.  The  preamble  of  this  ordinance  recites  that  “  the 
streets  of  Jersey  City  are  now  occupied  by  poles  belonging 
to  corporations,  which  poles  are  used  for  carrying  wfires  for 


1  Compilation  of  the  Laws  and  Charters,  etc.,  op.  cit., 


p.  697. 


TELEGRAPH  FRANCHISE  CONDITIONS. 


335 


telegraph  purposes  ”,  and  “  such  corporations,  while  reaping 
rich  rewards  from  their  own  business,  are  of  no  material 
benefit  to  the  city,  inasmuch  as  they  use  the  public  thorough¬ 
fares  without  aiding  or  assisting  our  people  to  bear  the 
burden  of  taxation  Accordingly,  the  mayor  and  aider- 
men  of  Jersey  City  ordained  that  every  company  engaged 
in  the  business  of  sending  messages  for  pay,  “  which  busi¬ 
ness  necessitates  the  erection  of  poles  and  wires  through,  or 
across,  or  over  the  streets  or  other  thoroughfares  or  public 
places  of  Jersey  City,  or  the  laying  of  wires  underground”, 
should  pay  to  the  city  treasurer  an  annual  license  fee  of 
$500.  Every  company  was  required,  before  commencing 
business  and  before  the  designation  of  a  route  for  its  poles 
or  wires,  to  enter  into  an  agreement  to  pay  this  fee. 

Under  the  general  ordinance  concerning  telegraph  poles 
in  the  public  streets,  passed  the  preceding  year,  the  city 
had  required  that  all  poles,  whether  owned  by  telegraph 
companies  or  by  departments  of  the  city  government,  should 
be  branded.2  It  was  also  provided  that  “  every  telegraph 
pole  hereafter  erected  shall  be  at  least  35  feet  in  height, 
above  the  ground,  and  shall  be  straight,  well  trimmed  and 
painted,  and  kept  painted,  and  in  good  order,  and  at  least 
once  in  each  year  each  pole  within  the  city  limits  shall  be 
painted  with  brown  paint  a  distance  of  six  feet  from  the  sur¬ 
face  of  the  ground,  and  the  remainder  of  each  pole  shall  be 
painted  white  ”.  By  an  amendment  to  this  ordinance 
adopted  in  1885,  it  was  made  unlawful  to  erect  any  tele¬ 
graph  pole  in  front  of  the  entrance  of  any  dwelling-house, 
or  within  a  distance  of  50  feet  from  any  other  telegraph 
pole,  or  near  the  corner  of  any  street  upon  a  line  with  any 
cross-walk,  or  within  a  distance  of  10  feet  from  any  public 
street  lamp.3 

Under  an  ordinance  of  the  City  of  Trenton,  approved 
January  10,  1896,  granting  permission  to  the  Postal  Tele¬ 
graph  Cable  Company  to  erect  its  structures  in  such  of  the 
public  ways  of  the  city  as  its  business  might  require,  it  was 
provided  that  the  company  should  pay  annually,  “  as 
partial  compensation  for  the  franchise  hereby  granted  ”,  the 
sum  of  50  cents  for  each  pole  erected  or  used  and  the  sum  of 


1  Revised  Ordinances  of  Jersey  City,  Griffiths,  1899,  p.  43. 


336 


MUNICIPAL  FRANCHISES. 


$1  for  every  mile  of  wire  maintained  by  the  grantee  within 
the  city  limits.1  The  company  was  to  provide  space  on  all 
its  poles  for  the  free  use  of  the  police  and  fire  alarm  tele¬ 
graph  system.  The  company’s  poles  were  not  to  be  erected 
in  front  of  any  premises  without  first  obtaining  the  legal 
consent  of  the  owners,  and  no  wires  were  to  be  attached  to 
buildings  without  such  consent.  All  poles  were  to  be  “  neat, 
symmetrical  and  painted  ”,  and  no  pole  was  to  be  “  less  than 
20  feet  above  the  surface  of  the  ground  ”. 

163  General  regulations  for  poles  and  wires  —  Somer¬ 
ville,  Mass. — Under  the  general  laws  of  Massachusetts  a 
telegraph  company  is  authorized  to  occupy  the  public  ways 
of  the  state,  and  the  local  authorities  are  required  to  “  give 
the  company  a  writing  specifying  where  the  poles  may  be 
located,  the  kind  of  poles,  the  height  at  which,  and  the  places 
where,  the  wires  may  be  run  ”.  The  general  provisions  gov¬ 
erning  telegraph  companies  are  substantially  the  same  as 
those  governing  telephone  companies,  to  which  reference  has 
been  made  in  the  preceding  chapter.2  By  a  special  pro¬ 
vision,  however,  a  telegraph  company  is  required  to  receive 
dispatches  from  or  for  other  telegraph  companies  and  from 
or  for  any  person  and,  upon  payment  of  the  usual  charges 
for  transmitting  dispatches,  according  to  the  regulations  of 
the  company,  to  transmit  them  “  faithfully  and  impar¬ 
tially  ”. 

Under  chapter  22  of  the  general  ordinances  of  the  City 
of  Somerville,  poles  erected  upon  locations  granted  by  the 
board  of  aldermen,  and  all  other  fixtures  to  which  it  is  de¬ 
sired  to  attach  wires,  must  be  located  as  directed  by  the 
board,  and  their  particular  locations,  if  not  designated  by  the 
board,  must  be  satisfactory  to  the  commissioner  of  electric 
lines  and  lights.3  A  plan  showing  the  exact  location  of  each 
pole  and  conduit,  certified  by  this  commissioner  and  satis¬ 
factory  in  all  respects  to  the  city  engineer,  must  be  made  and 
filed  with  the  city  by  the  person  to  whom  permission  was 
granted,  within  20  days  after  the  erection  of  the  poles  or  the 
construction  of  the  conduits.  Poles  are  not  to  be  more  than 
45  feet  or  less  than  25  feet  in  height  above  the  ground, 

1  Charter  and  Ordinances  of  Trenton,  1908,  p.  631. 

*  Ante ,  sec.  145. 

3  Somerville  Municipal  Manual,  1901,  p.  118. 


TELEGRAPH  FRANCHISE  CONDITIONS.  337 

and  not  more  than  14  inches  in  diameter  at  the  surface  of 
the  ground,  unless  the  board  of  aldermen  directs  that  poles 
of  other  dimensions  may  be  used.  Wires  must  be  constantly 
maintained  at  a  height  of  not  less  than  20  feet  from  the 
ground  at  every  point,  and  no  wire  may  be  attached  to  a 
pole  by  means  of  a  bracket  or  other  side  fixtures,  nor  may 
the  wires  of  more  than  one  person  or  company  be  placed  on 
the  same  cross-arm.  The  ordinance  provides  that  “  the  poles 
shall  be  kept  well  painted,  of  a  uniform  color,  and  in  good 
condition”,  to  the  satisfaction  of  the  commissioner  of  elec¬ 
tric  lines  and  lights ;  that  “  the  name  of  the  owner,  with  a 
special  number  for  each  pole  and  owner,  shall  be  distinctly 
painted  in  white  letters  upon  a  dark  background  upon  every 
pole  about  seven  feet  from  the  ground,  or  the  owners  of  the 
pole  and  all  other  persons  and  corporations  having  authority 
to  attach  wires,  cross-bars  or  other  things  thereto,  shall  be 
otherwise  designated  thereon  by  words  or  figures  ”,  to  the 
satisfaction  of  the  commissioner.1 

The  exclusive  use  of  the  upper  cross-bar  and  the  top  above 
the  cross-bar  of  each  pole,  is  reserved  to  the  city,  free  of 
cost,  for  wires  for  municipal  purposes.  This  cross-bar  is  to 
be  placed  at  least  three  feet  from  the  next  cross-bar.  The 
person  authorized  to  erect  poles  or  wires  may  not  permit 
their  use  by  any  other  person  without  permission  from  the 
board  of  aldermen.  When  directed  by  the  commissioner  of 
electric  lines  and  lights,  the  owner  of  the  poles  must  place 
steps  on  that  portion  of  each  pole  more  than  10  feet  from  the 
ground,  and  it  is  specifically  provided  that  “  no  person  shall 
climb  any  such  pole  by  the  use  of  spurs  ”.  It  is  also  pro¬ 
vided  that  “  every  location  and  permission  granted  ”  shall 
be  void  unless  within  six  months  from  the  date  of  the  grant 
the  poles  shall  have  been  erected,  the  conduits  constructed, 
and  the  wires  placed  and  put  in  operation.  The  location  of 
any  pole,  conduit  or  wire  shall  become  null  and  void,  if  so 
declared  by  the  board  of  aldermen,  in  case  the  operation  or 
use  of  it  shall  have  been  discontinued  for  a  period  of  six 
months.  Persons  owning  or  operating  electric  wires  are  re¬ 
quired  to  place  them  in  cables  whenever  ordered  by  the  board 
of  aldermen  to  do  so. 


1  Section  7  of  ordinance,  as  amended,  Nov.  15, 1907. 


338 


MUNICIPAL  FRANCHISES. 


164.  Combinations  forbidden  —  Indianapolis  ;  Tolodo  ; 
Newport,  Ky, ;  Minneapolis. — The  extreme  eagerness  with 
which  boards  of  aldermen  have  attempted  to  prevent  monop¬ 
oly  in  public  utilities  through  specific  provisions  in  franchise 
grants,  is  nowhere  better  illustrated  than  in  the  history  of 
telegraph  franchises.  I  may  add  that  the  futility  of  such 
efforts  also  receives  an  excellent  illustration  here.  As  far 
back  as  July  26,  1856,  the  common  council  of  the  City  of 
Indianapolis  granted  a  location  to  the  “  Union  Telegraph  ”, 
predecessor  of  the  Western  Union  Telegraph  Company.1 
In  1876  the  city  granted  a  location  to  the  Atlantic  and 
Pacific  Telegraph  Company,  on  condition  that  its  poles  were 
to  be  “  shaved  and  of  respectable  appearance  ”.2  This  com¬ 
pany’s  lines  were  absorbed  by  the  Western  Union  in  1881. 

On  January  16,  1882,  the  city  granted  a  franchise  to  the 
Mutual  Union  Telegraph  Company  of  New  York.3  This 
company  was  absorbed  by  the  Western  Union  in  1883.  The 
city  had  reserved  the  right  to  repeal  the  Mutual  Union  fran¬ 
chise,  and  to  impose  a  tax  upon  the  company  for  the  priv¬ 
ilege  of  using  the  streets  with  its  poles  and  wires.  On  April 
28,  1884,  an  ordinance  was  passed  repealing  the  franchise 
and  providing  that  the  Mutual  Union  Telegraph  Company 
or  its  successors  should  remove  the  poles  and  wires  from  the 
streets.4  There  was  a  proviso,  however,  that  if  the  company 
or  its  successors  should  within  30  days  pay  the  annual  tax 
of  $2  per  pole  required  by  the  city’s  general  licensing  ordi¬ 
nance,  the  poles  and  wires  need  not  be  removed  and  the  re¬ 
pealing  ordinance  should  he  void.  It  is  authoritatively 
stated  that  the  Western  Union  Telegraph  Company  has  paid 
this  annual  pole  tax  ever  since  that  date.5 

On  July  7,  1884,  the  city  gave  a  franchise  to  the  Balti¬ 
more  and  Ohio  Telegraph  Company.6  It  was  provided  that 
“  in  case  said  company  or  its  successors  or  assigns  shall  at 
any  time  merge  or  consolidate  the  same  with  the  Western 
Union  Telegraph  Company  or  any  other  telegraph  company, 
or  lease  to  or  otherwise  turn  over  its  said  line  of  telegraph 
to  said  Western  Union  Telegraph  Company,  then,  and  in 
that  event,  the  rights  hereby  granted  shall  be  null  and  void, 
and  the  poles  and  wires  of  said  company  may  be  removed 

1  Laws  and  Ordinances,  op.  cit p.  1100.  4  Tbid p.  1105. 


TELEGRAPH  FRANCHISE  CONDITIONS. 


339 


from  the  streets  and  alleys  of  said  city  ”.  At  the  foot  of 
this  ordinance,  as  published  in  the  official  collection  of 
“  Laws  and  Ordinances  ”  of  the  City  of  Indianapolis, 
revision  of  1904,  there  appears  the  following  note: 

“All  of  the  lines  of  this  company  were  purchased  by  the  Western 
Union  Telegraph  Company  on  October  15, 1887,  and  have  since  formed 
a  part  of  that  company’s  system.”  1 

On  July  7,  1884,  another  franchise  was  granted  to  the 
Bankers’  and  Merchants’  Telegraph  Company,  which  has 
since  been  absorbed  by  the  Postal  Telegraph  Cable  Com¬ 
pany.2  There  was  contained  in  this  franchise  a  provision 
against  consolidation  with  the  Western  Union,  similar  to 
that  contained  in  the  Baltimore  and  Ohio  Telegraph  Com¬ 
pany’s  franchise.  The  city  reserved  the  right  to  impose  a 
tax  of  not  less  than  $2  or  more  than  $5  a  year  on  each  pole 
maintained  by  the  company. 

In  1896  the  board  of  public  works  of  Indianapolis  entered 
into  new  and  more  elaborate  franchise  contracts  with  the 
Western  Union  Telegraph  Company  and  the  Postal  Tele¬ 
graph  Cable  Company,  both  of  which  were  ratified  by  ordi¬ 
nance  of  the  common  council.3  Under  the  Postal  Telegraph 
franchise  the  company  agreed  to  furnish  free  telegraphic 
service  to  the  amount  of  $75,  calculated  at  the  regular  rates, 
and  also  to  set  aside,  for  the  exclusive  use  of  the  city,  four 
conductors  of  the  company’s  underground  cables  and  to  keep 
them  in  repair,  whether  such  cables  had  been  laid  in  the 
company’s  own  conduits  or  in  ducts  purchased  or  leased  from 
any  other  company.  No  such  provision  was  contained  in 
the  Western  Union  contract.  Both  companies  were  author¬ 
ized  and  required  to  place  their  wires  underground  within 
a  certain  district  of  the  city,  and  in  the  contract  with  the 
Western  Union  there  was  a  proviso  to  the  effect  that  “  the 
rights  herein  granted  to  go  underground  shall  not  enlarge, 
curtail  or  change  any  rights  or  privileges  in  the  City  of 
Indianapolis,  which  the  company  now  has,  except  the  right 
to  go  underground  ”.4 

By  an  ordinance  approved  February  20,  1896,  the  city 
made  it  unlawful  “  for  any  telegraph  company  having  in  its 
possession  a  telegram  or  message  for  anyone  within  the  cor- 

1  Laws  and  Ordinances,  op.  cit.,  p.  1103.  8  Ibid.,  pp.  1108,  1115. 

*  Ibid.  p.  1107.  *  I  bid.,  p.  1120. 


340 


MUNICIPAL  FRANCHISES. 


porate  limits  of  the  city  ”,  to  make  a  special  charge  for  the 
delivery  of  such  message.1 

Toledo  has  also  attempted  to  preserve  competition  in  the 
telegraph  business.  A  franchise  was  granted  by  this  city 
November  7,  1881,  to  the  Mutual  Union  Telegraph  Company 
of  New  York,  containing  a  provision  that  in  case  the  com¬ 
pany  should  at  any  time  thereafter  “  consolidate  with  any  of 
the  competing  companies  at  present  in  existence,”  its  rights 
and  privileges  under  the  franchise  should  be  at  once  for¬ 
feited  and  its  poles,  lines  and  wires  constructed  under  the 
franchise,  should  “  thereby  revert  to  the  City  of  Toledo  ”.2 
This  company  was  absorbed  by  the  Western  Union;  but  in 
the  various  discussions  of  the  advantages  and  disadvantages 
of  municipal  ownership  that  have  come  to  the  writer's 
attention,  he  has  not  noticed  any  reference  to  a  system  of 
telegraph  poles  and  wires  owned  by  the  City  of  Toledo  as  a 
result  of  this  combination. 

In  a  franchise  granted  by  Toledo  to  the  Michigan  Postal 
Telegraph  Company,  December  10,  1883,  there  were  even 
more  elaborate  provisions  against  combination.3  It  was 
ordained  that  if  the  company  “  shall  sell  or  lease  its  fran¬ 
chises,  or  any  of  its  privileges  hereby  granted,  to  any  tele¬ 
graph  company  now  having  an  office  in  the  City  of  Toledo, 
or  shall  consolidate  with  such  company,  or  combine  with  any 
companies  whatever,  in  any  manner  so  as  to  prevent  or 
remove  legitimate  competition  of  rates,  then  the  rights 
hereby  granted  shall  be  forfeited  and  this  permission  shall 
cease  and  be  of  no  effect  ”.  In  case  of  the  breach  by  the 
company  of  any  of  the  conditions  of  the  franchise,  “  all  the 
property  rights  and  franchises  of  said  company  within  the 
City  of  Toledo  immediately  revert  to  and  become  the  prop¬ 
erty  of  said  city  ”.  This  franchise  was  later  acquired  by  th6 
Postal  Telegraph  Cable  Company.  The  latter  company  was 
given  a  new  franchise  in  1893,  with  a  similar  provision 
against  consolidation  of  interests  and  for  the  forfeiture  of 
property  to  the  city  in  case  of  breach  of  franchise  condi¬ 
tions.4 

An  ordinance  granted  by  the  City  of  Newport,  Ky., 
December  18,  1895,  to  the  Postal  Telegraph  Cable  Company, 

1  Laws  and  Ordinances,  op.  cit.,  p.  1121. 

2  Special  Ordinances,  op.  cit.,  p.  700. 


8  Ibid.,  p.  703. 
4  Ibid.,  p.  708. 


TELEGRAPH  FRANCHISE  CONDITIONS. 


341 


provided  that  if  the  company  or  its  successors  should  “  lease, 
rent  or  consolidate  ”  so  much  of  its  system  as  is  located  in 
the  City  of  Newport  with  any  other  corporation  or  person 
“  engaged  in  the  same  or  like  business  ”,  or  should  enter 
into  any  “  combination,  trust  or  arrangement  ”  with  any 
such  corporation  or  person,  “  with  reference  to  said  business, 
or  the  rates  to  be  charged  for  services  performed  by  said  com¬ 
pany  ”,  the  rights  and  privileges  under  the  franchise  should 
become  absolutely  null  and  void,  and  all  the  company’s 
fixtures  in  the  streets,  placed  there  in  pursuance  of  this  or 
any  other  ordinance,  should  be  at  once  removed  by  their 
owner  or  lessee.1  It  was  also  provided  that  the  company 
should  maintain  an  office  in  the  City  of  Newport  for  re¬ 
ceiving  and  transmitting  messages  and  should  not  charge  a 
greater  rate  than  that  charged  by  the  Western  Union  Tele¬ 
graph  Company  for  similar  services  under  like  conditions. 
The  company  was  required  to  file  a  written  acceptance  of 
the  ordinance,  subject  to  all  its  limitations.  As  a  matter  of 
fact, /the  company  did  not  accept  the  ordinance  in  writing; 
but  the  court  held  that  the  ordinance  was  valid  and  the  com¬ 
pany’s  acts  in  proceeding  to  erect  poles,  wires  and  other 
structures,  constituted  an  acceptance.2 

Among  the  many  other  cities  which  have  attempted  to 
prevent  consolidation  of  companies  by  franchise  stipula¬ 
tions,  is  Minneapolis.  In  a  franchise  granted  by  this  city 
in  1884  to  the  Rapid  Transit  Telegraph  Company,  it  is  pro¬ 
vided  “  that  whenever  any  other  telegraph  company  doing 
business  in  the  City  of  Minneapolis  shall  obtain  the  control 
or  management  of  the  company  herein  named,  or  of  its  suc¬ 
cessors  or  assigns,  then  and  in  such  case  all  right,  license  and 
privileges  hereby  granted  shall  cease  and  become  forfeited 
without  any  further  action  by  the  city  council  ”.3 

165-  Free  service  to  city— Milwaukee ;  Springfield,  Ill.; 
Cedar  Rapids. — Mention  has  been  made  in  preceding  para¬ 
graphs  of  two  or  three  instances  in  which  telegraph  fran¬ 
chises  were  granted  on  condition  that  a  certain  amount  of 
free  service  be  rendered  to  the  city.  A  franchise  granted 
by  the  City  of  Milwaukee,  December  28,  1891,  to  the  Western 
Union  Telegraph  Company  also  contains  an  important  pro- 

1  Special  Ordinances,  City  of  Newport,  p.  435. 

2  See  note,  Ibid.,  p.  435.  Postal  Telegraph  Co.  vs.  City  of  Newport,  25  R.  635. 

3  Charter,  Ordinances,  etc.,  op.  cit .,  p.  601. 


342 


MUNICIPAL,  FRANCHISES. 


vision  for  free  service.1  It  is  provided  that  so  long  as  the 
ordinance  remains  in  force,  the  company  shall  issue  to  the 
officers  of  the  city  designated  by  the  mayor  “  annual  franks 
authorizing  the  free  transmission  over  any  of  the  lines  of 
the  telegraph  company  in  the  United  States,  of  messages  re¬ 
lating  strictly  to  the  corporate  business  of  the  City  of  Mil¬ 
waukee  to  an  amount  not  exceeding  $400  per  annum 
The  tolls  on  these  messages  were  to  be  calculated  at  the 
regular  commercial  day  rates,  and  the  city  agreed  to  pay 
one-half  the  regular  tolls  on  all  official  messages  in  excess  of 
the  $400. 

In  a  franchise  granted  to  the  Postal  Telegraph  Cable  Com¬ 
pany,  February  7,  1884,  by  the  City  of  Springfield,  Illinois, 
it  wms  stipulated  that  the  company  should  maintain  an  office 
and  an  operator  or  operators  at  some  convenient  point  within 
the  city  for  the  purpose  of  affording  telegraph  facilities  to 
the  public,  and  that  it  should  do  the  official  telegraphing  of 
the  city  free  of  change,  and  furnish  pole  room  for  the  city 
fire  alarm  wires  if  required.2  The  ordinance  was  declared  to 
be  in  the  nature  of  a  contract  and  was  accepted  by  the  com¬ 
pany  shortly  after  its  passage. 

In  a  franchise  granted  by  the  City  of  Cedar  Rapids,  Iowa, 
March  20,  1891,  to  the  Western  Union  Telegraph  Company, 
it  was  provided  that  “  in  consideration  of  the  rights  above 
granted  ”,  the  company  should  allow  the  city  the  use  of  its 
poles  for  the  police  and  fire  alarm  wires,  and  should 
“  furnish  to  said  city,  free  of  charge,  an  electric  clock,  such 
as  is  maintained  for  private  use,  and  operate  the  same,  said 
clock  to  be  placed  in  such  position  in  the  city  building  as 
may  be  selected  by  the  mayor  ”.  3 

166.  Miscellaneous  regulations— Nashville  ;  South  Bend ; 
Portland,  Ore. — A  franchise  granted  to  the  Postal  Telegraph 
Cable  Company  by  the  City  of  Nashville  in  September,  1890, 
provided  that  in  case  of  fire  the  members  of  the  fire  depart¬ 
ment  would  have  the  right,  if  necessity  should  arise,  to  cut 
the  company’s  wires  in  the  vicinity  of  the  fire,  without  com¬ 
pensation  being  claimed  for  the  damage  necessarily  inflicted 
in  this  way.4  It  was  also  provided  that  if  the  removal  of 
any  pole  or  wire  belonging  to  the  company  should  be  de- 

1  Ordinances  relating  to  Franchises,  1896,  p.  1133. 

*  Franchise  Ordinances,  City  of  Springfield,  1907,  p.  16. 

8  Revised  Ordinances,  City  of  Cedar  Rapids,  1906,  p.  366. 

4  Laws  of  Nashville,  op.  cit .,  p.  992. 


TELEGRAPH  FRANCHISE  CONDITIONS. 


343 


manded  by  the  erection  of  a  building  or  for  any  other  rea¬ 
son  of  a  public  or  quasi-public  nature  deemed  sufficient  by 
the  board  of  public  works  and  affairs,  the  company  should, 
on  three  days’  written  notice,  remove  such  pole  or  wire 
temporarily  or  permanently  and  accept  a  new  location  along 
the  same  route.  The  company’s  poles  were  to  be  wooden 
and  were  to  be  kept  at  all  times  “  nicely  painted  The 
exact  place  of  location  and  “  depth  of  hole  ”  were  to  be  de¬ 
termined  by  the  board  of  public  works  and  affairs.  In  case 
the  company  should  fail  or  cease  to  operate  its  lines  for  a 
period  of  60  days,  on  wrritten  notice  from  this  board  it  was 
to  remove  its  fixtures  from  the  streets. 

In  a  franchise  granted  during  the  succeeding  year  to  the 
Western  Union  Telegraph  Company,  a  provision  was  in¬ 
serted  that  if  any  wire  erected  under  the  authority  of  the 
franchise  should  cease  to  be  used  for  a  period  of  30  days,  it 
should  be  deemed  and  known  as  a  “  dead  wire  ”  and  should 
be  forthwith  taken  down  and  removed  by  the  company.1 
The  city  reserved  the  right  further  to  regulate  the  opera¬ 
tion  of  the  company’s  wires,  and  also  to  repeal  the  ordinance 
whenever  in  the  judgment  of  the  mayor  and  city  council  its 
repeal  should  be  demanded  by  the  public  welfare.  Such 
action  could  be  taken  by  the  city  without  incurring  any 
liability  to  the  company. 

In  a  franchise  granted  by  the  City  of  South  Bend,  Decem¬ 
ber  11,  1882,  to  the  Postal  Telegraph  Company,  a  provision 
was  inserted  to  the  effect  that  the  company’s  poles  should  be 
erected  “  along  the  outer  curb  of  the  sidewalks,  just  inside 
of  said  curb,  in  such  a  manner  as  not  to  injure  the  curb¬ 
stones  or  plank,  or  shade  trees  along  the  same,  and  so  as 
not  to  be  in  front  of  the  door  of  any  person’s  house,  or  of 
the  entrance  of  any  person’s  house,  barn  or  lot  ”.2  The  poles; 
were  to  be  painted  with  red  lead  within  three  months  after 
their  erection. 

The  City  of  Portland,  Oregon,  granted  a  franchise  Jan¬ 
uary  6,  1887,  to  the  Pacific  Postal  Telegraph-Cable  Com¬ 
pany,  which  provided,  among  other  things,  that  whenever 
any  person  or  company  had  obtained  permission  from  the  > 
committee  on  streets  and  public  property  of  the  city  to  re- . 
move  any  building  through  the  streets,  the  telegraph  com-- 

1  Laws  of  Nashville,  op.  cit.,  p.  997. 

a  Revised  Ordinances,  City  of  South  Bend,  1905,  p.  8G. 


344  MUNICIPAL  FRANCHISES. 

I 

pany  should,  on  due  notice,  raise,  remove  or  adjust  its  lines, 
at  its  own  expense,  so  as  to  allow  an  unobstructed  passage 
for  the  building.1  This  ordinance  also  contained  a  clause 
declaring  it  to  be  unlawful  for  any  unauthorized  person  to 
interfere  with  any  of  the  company’s  poles,  wires  or  other 
apparatus. 

In  a  franchise  granted  by  the  City  of  Portland  to  the 
Western  Union  Telegraph  Company,  July  21,  1893,  pro¬ 
vision  was  made  to  the  effect  that  the  grant  should  not  be 
exclusive,  the  city  reserving  to  itself  the  power  to  make  a 
similar  grant  to  any  other  telegraph  company  on  condition 
that  it  should  not  interfere  “  with  the  reasonable  and  proper 
exercise  of  the  privileges  herein  granted”.2  The  company 
was  required  to  furnish  the  use  of  its  poles,  free  of  charge, 
for  the  attachment  of  the  city’s  fire  alarm  boxes. 

187.  An  up-to-date  telegraph  franchise  —  Chicago. — An 
ordinance  granting  a  franchise  to  the  People’s  Mutual  Tele¬ 
graph  Company  was  passed  by  the  Chicago  City  Council, 
March  22,  1909.3  Under  this  franchise  the  company  was 
authorized  to  construct  and  operate  telegraph  lines  on  the 
structure  and  right  of  way  of  the  Metropolitan  West  Side 
Elevated  Pailway  Company  along  certain  streets,  with  the 
latter  company’s  consent.  It  was  also  authorized  to  place 
its  wires  in  the  conduits  owned  by  the  Commonwealth  Edi¬ 
son  Company,  with  like  consent.  It  was  also  authorized  to 
lease  the  right  to  maintain  its  telegraph  wires  in  the  under¬ 
ground  conduits  or  tunnels  of  any  other  person  or  corpo¬ 
ration  theretofore  or  thereafter  authorized  by  the  city  to 
maintain  such  tunnels  and  conduits.  In  order  to  make 
necessary  connections  for  its  lines,  the  company  was  further 
authorized  to  construct  underground  conduits  for  itself, 
none  of  them  to  exceed  600  feet  in  length  or  18  inches  in 
diameter.  The  rights  granted  by  this  franchise  were  to  ex¬ 
pire  January  1,  1929.  The  company  was  required  to  change 
the  location  of  its  ducts  or  wires  whenever  necessary  in 
order  to  prevent  interference  with  any  municipal  improve¬ 
ment.  There  was  also  a  provision  that  if  the  city  should 
construct  a  municipal  subway,  the  company  should,  at  its 
own  expense,  remove  its  wires  to  such  subway  upon  terms 
and  conditions  prescribed  by  the  city  council.  The  city  re- 

1  Revised  Ordinances,  op.  cit .,  p.  154.  a  Ibid.,  p.  155. 

8  Journal  cf  Proceedings  of  City  Council,  March  22,  1909,  p.  3522. 


TELEGRAPH  FRANCHISE  CONDITIONS. 


345 


served  the  right,  after  the  expiration  of  three  years,  to  amend 
the  franchise  ordinance  for  the  purpose  of  regulating  the 
company’s  rates.  The  right  to  regulate  and  fix  maximum 
rates  by  ordinance  once  every  three  years  thereafter  during 
the  life  of  the  grant  was  also  reserved.  Whenever  the  city 
might  desire  to  take  up  the  matter  of  regulating  rates,  the 
company  was  bound,  on  30  days’  notice,  to  furnish  the  city 
with  “  all  the  facts,  data  and  information  in  its  possession 
which  the  city  may  require  to  assist  the  city  to  make  such 
proper  and  reasonable  regulation  of  rates  If  at  any  time 
the  company  should  contest  the  rates  fixed  by  ordinance  and, 
pending  litigation,  should  collect  rates  in  excess  of  those  so 
fixed,  and  if  thereafter  the  rates  fixed  by  the  ordinance  were 
sustained,  the  company  was  bound  to  refund  to  all  its  patrons 
the  amount  of  its  excessive  collections  with  5  per  cent 
annual  interest. 

In  case  the  city  should  pass  any  special  ordinance  chang¬ 
ing  this  company’s  rates  or  any  general  ordinance  regulating  • 
the  rates  of  all  telegraph  companies,  the  company  would  be 
required  to  file  with  the  city  annually  on  March  15  a  report 
for  the  preceding  calendar  year  setting  forth  in  reasonable 
detail,  according  to  the  forms  prescribed  by  the  city  comp¬ 
troller,  “  the  character  and  amount  of  business  done  by  said 
telegraph  company  in  the  transmission  over  its  lines,  from 
Chicago,  of  telegraph  messages,  and  showing  the  amount  of 
receipts  from  such  business,  and  the  expense  of  conducting 
said  business;  and  giving  full  information  on  all  such  other 
matters  relating  to  the  rates  on  such  messages  as  may  be 
from  time  to  time  specified  by  the  city  council  The  origi¬ 
nal  books  and  vouchers  of  the  company  were  to  be  open  to 
the  city  comptroller  for  verification  of  this  report.  The 
company  was  required,  as  long  as  it  continued  in  business, 
to  maintain  its  principal  office  in  the  City  of  Chicago  and 
keep  there  “  a  complete  set  of  records,  books,  accounts,  con¬ 
tracts  and  original  vouchers  of  receipts  and  expenditures  ”, 
and  was  forbidden  to  remove  any  such  books  or  records, 
except  bond  registry  and  stock  transfer  books,  beyond  the 
limits  of  the  city. 

For  the  first  three  years,  and  until  changed  by  ordinance, 
the  company  was  limited  to  the  following  maximum  rates: 

For  a  message,  from  Chicago  to  St.  Louis,  of  ten  words,  exclusive  of 


346 


MUNICIPAL  FRANCHISES. 


address  and  signature,  25  cents  and  not  more  than  two  cents  for  each 
additional  word. 

For  a  similar  message,  from  Chicago  to  Kansas  City,  30  cents,  with 
two  cents  for  each  additional  word. 

It  was  stipulated  that  if  the  company  should  extend  its 
telegraph  lines  to  other  cities  than  St.  Louis  and  Kansas 
City,  the  rates  for  the  transmission  of  messages  from  Chicago 
should  not  be  greater  in  proportion  to  the  St.  Louis  rate 
than  the  ratio  of  distances  from  Chicago,  with  the  provision, 
however,  for  a  minimum  charge  of  20  cents  per  message  of 
ten  words,  and  two  cents  for  each  additional  word.  The 
company  was  required  to  pay  the  city  an  annual  fee  of  two 
and  one-half  cents  per  wire  for  each  street  crossed  by  its 
wires,  whether  carried  on  the  elevated  railroad  structure,  in 
the  company’s  own  conduits  or  in  ducts  leased  from  other 
companies.  A  further  annual  fee  of  50  cents  per  lineal  foot 
of  underground  ducts  owned  by  the  company  itself  was 
imposed.  The  company  was  required  to  file  an  annual  state¬ 
ment,  itemized  and  sworn  to,  showing  the  number  and  loca¬ 
tion  of  its  wires  and  the  fees  due  the  city.  Failure  to  pay 
these  fees  within  60  days  after  they  became  due  would  re¬ 
sult  in  the  forfeiture  of  the  franchise. 

It  was  specifically  provided  that  the  company’s  wires  should 
not  be  used  for  the  transmission  of  telephone  messages  and 
that  the  company’s  conduits  should  be  constructed  and  its 
wires  placed  under  the  supervision  of  the  Commissioner  of 
Public  Works  and  the  City  Electrician.  Before  securing  a 
permit,  the  company  was  required  to  file  plans  showing  the 
location  of  its  proposed  conduits  and  wires  and  the  time 
within  which  its  work  was  to  be  done.  The  company  was 
required,  at  its  own  expense,  to  restore  the  streets  and  alleys 
to  a  condition  satisfactory  to  the  city  authorities.  At  the 
termination  of  the  franchise  the  company  was  to  “  remove  all 
wires  placed  or  attached  by  it,  pursuant  to  authority  herein 
given,  in  a  manner  satisfactory  ”  to  the  city,  and  in  case  it 
failed  to  do  so,  the  city  reserved  the  right  to  remove  the 
wires  at  the  company’s  expense. 

The  company  agreed  to  assume  all  liability  for  damages 
resulting  from  the  construction  or  maintenance  of  its  lines, 
and  to  execute  a  bond  in  the  sum  of  $25,000  to  enforce  this 
liability.  This  bond  was  also  to  be  conditioned  upon  the 
company’s  protecting  the  city  from  any  loss  or  expense  result- 


TELEGRAPH  FRANCHISE  CONDITIONS. 


347 


ing  from  any  lessening  of  the  responsibility  of  the  companies 
whose  structures  this  company  might  use.  It  was  made  a 
condition  of  the  grant  that  the  company  should  have  a 
properly  equipped  telegraph  line  in  operation  as  far  as  St. 
Louis  not  later  than  January  1, 1911.  It  was  further  provided 
that  the  company,  in  addition  to  any  office  it  might  maintain 
in  the  Board  of  Trade  Building,  should  also  maintain  an 
office  in  the  Loop  district  of  Chicago  “  open  at  all  times 
during  the  day  and  night  to  the  general  public  for  the  trans¬ 
mission  of  telegraph  messages”.  Failure  to  fulfill  either  of 
the  conditions  last  mentioned  was  to  result  in  the  forfeiture 
of  the  grant. 

An  elaborate  provision  was  made  to  prevent  the  transfer  of 
the  grantee’s  franchise  to  a  competing  telegraph  company. 
Inasmuch  as  this  provision  represents  one  of  the  most  recent 
and  most  intelligent  attempts  to  prevent  consolidation  of 
public  utility  enterprises,  I  quote  section  13  of  the  ordinance 
in  full  as  follows : 

“  Said  People’s  Mutual  Telegraph  Company  shall  at  no  time  during 
the  life  of  this  ordinance  sell,  lease  or  convey  the  lines  of  wire,  plant, 
franchise  or  property  owned  or  used  by  it  in  connection  with  the  per¬ 
mission  and  authority  hereby  granted,  to  any  other  person,  firm  or  cor¬ 
poration  engaged,  directly  or  indirectly,  in  the  business  of  the  trans¬ 
mission,  from  Chicago,  of  telegraph  messages,  nor  shall  said  company 
consolidate  or  combine,  directly  or  indirectly,  with  any  person,  firm  or 
corporation  so  as  to  unite  the  lines  of  wire,  plant,  franchise  or  property 
used  in  connection  with  the  authority  and  permission  hereby  granted, 
with  the  wires,  plant,  franchise  or  property  of  any  person,  firm  or  cor¬ 
poration  engaged,  directly  or  indirectly,  in  the  business  of  the  trans¬ 
mission,  from  Chicago,  of  telegraph  messages,  and  said  company  shall 
not  at  any  time  during  the  life  of  this  ordinance  enter  into  any  agree¬ 
ment  or  combination  with  any  other  company  heretofore  existing  or 
hereafter  created  concerning  the  price  to  be  charged  by  the  said 
People’s  Mutual  Telegraph  Company  in  the  City  of  Chicago  for  the 
transmission  of  telegraph  messages  from  the  City  of  Chicago  to  any 
point  on  its  telegraph  lines;  but  the  said  company  shall  at  all  times 
during  the  life  of  this  ordinance  maintain  and  operate  the  plant, 
franchise  and  property  hereby  granted  as  an  independent  enterprise 
and  free  from  any  connection  with  any  person,  firm  or  corporation 
engaged  competitively  in  the  same  occupation;  provided,  however, 
that  the  rights  and  privileges  granted  to  the  People’s  Mutual  Telegraph 
Company  under  this  ordinance  may  pass  to  any  successor  of  said  tele¬ 
graph  company  except  a  competitor  in  the  business  of  transmitting 
telegraph  messages,  by  assignment,  mortgage  or  otherwise,  subject  to 
all  the  terms  and  conditions  of  this  ordinance,  and  said  successor  or 
successors  shall  file  with  the  City  Clerk  its  acceptance  of  said  terms 
and  conditions.” 


348 


MUNICIPAL  FRANCHISES. 


The  city  reserved,  in  express  terms,  “  the  right  to  pass  any 
ordinance  which,  under  its  expressed,  implied  or  inherent 
police  power,  it  possesses,  or  may  hereafter  possess,  the  power 
to  enact  The  city  also  expressly  reserved  the  right  to 
exercise  any  authority  which  it  might  secure  from  the  State 
legislature  to  pass  a  general  ordinance  fixing  and  regulating 
the  rates  of  telegraph  companies  for  the  transmission  of  mes¬ 
sages  from  Chicago,  or  licensing,  regulating  or  taxing  tele¬ 
graph  companies.  It  was  also  expressly  stated  that  the  grant 
was  not  exclusive  and  that  neither  the  city  nor  the  State 
should  be  in  any  way  bound  or  its  right  to  fix  rates  affected 
by  the  price  paid  or  the  valuation  fixed  for  the  property  or 
rights  of  the  company  in  connection  with  any  lease,  sale  or 
transfer  or  in  connection  with  any  consolidation  or  merger  of 
the  company. 

Before  the  company  could  avail  itself  of  the  privileges 
granted  by  the  ordinance,  it  was  required  to  cause  to  be  filed 
with  the  city  written  instruments  executed  by  the  West  Side 
Elevated  Railway  Company,  the  Commonwealth  Edison  Com¬ 
pany  and  any  other  companies  whose  structures  this  company 
might  use,  to  the  effect  that  this  franchise  should  not  be 
“  held  to  enlarge,  alter  or  affect  ”  the  rights  and  privileges 
granted  to  these  various  companies  under  their  franchises, 
except  to  the  extent  necessary  to  enable  this  company  to  enjoy 
the  privileges  conferred  by  this  ordinance. 


CHAPTER  XI. 

MESSENGER  AND  SIGNAL  FRANCHISES. 


168.  Variety  of  uses  of  electric  signals. 

169.  Maximum  rates,  option  to  pur¬ 

chase,  etc.— Grand  Rapids. 

170.  Use  of  other  poles ;  amount  of 

service ;  rates,  etc.— Salt  Lake 
City. 

171.  Construction  not  to  interfere  with 

local  improvements ;  relinquish¬ 
ment  of  former  rights.— Seattle. 

172.  An  electric  clock  franchise.— Kan¬ 

sas  City,  Mo. 

173.  Routes  described  ;  free  call  boxes 

for  city.— Denver. 


174.  Auxiliary  fire  alarm  service. — Har¬ 

risburg,  Erie,  New  York  City. 

175.  Compensation  to  city  ;  mode  of  ar¬ 

bitration  in  case  of  purchase. — 
Portland,  Ore. 

176.  Free  police  alarm  boxes  ;  city  may 

use  poles.— Butte. 

177.  Special  provisions  of  signal  fran¬ 

chises  in  various  cities. — Nashville  ; 
Springfield,  Ill.  ;  Minneapolis. 

178.  Modern  franchise  for  general  sig¬ 

naling  service. — New  York  City. 

179.  Transmission  of  music  by  elec¬ 

tricity  proposed  in  New  York. 


168.  Variety  of  uses  of  electric  signals. — The  importance 
of  franchises  for  electric  wires  to  be  used  for  signaling  is 
not  so  generally  appreciated  as  the  importance  of  other  public 
utility  grants.  This  is  partly  due  to  the  fact  that  the  various 
services  rendered  by  means  of  signals  are  not  so  heavily 
capitalized  as  other  utilities,  and  partly  to  the  fact  that  the 
use  of  these  services  is  for  the  most  part  confined  to  offices, 
factories,  business  houses  and  a  comparatively  few  residences. 
Local  messenger  service  is  generally  furnished  as  an  adjunct 
to  the  telegraph  business  and  is  carried  on  by  separate  local 
companies,  which  are  controlled  and  officered  by  the  big  tele¬ 
graph  companies.  Indeed  one  of  the  chief  uses  to  which  a 
signaling  system  is  put,  is  the  calling  of  messengers  for  the 
purpose  of  taking  telegrams.  The  functions  of  the  district 
messenger  companies,  as  described  by  the  Bureau  of  the 
Census  in  its  bulletin  on  telephones  and  telegraphs,  are,  on 
the  one  hand,  the  handling  of  telegraph  messages  for  com¬ 
panies  like  the  Western  Union  Telegraph  Company  and  the 
Postal  Telegraph  Cable  Company,  and,  on  the  other  hand,  the 
carrying  of  urgent  written  messages  and  the  distribution  of 
parcels  and  packages. 

Another  important  function  of  signaling  and  one  that  is 

349 


350 


MUNICIPAL  FRANCHISES. 


now  of  long  standing,  is  the  fire  alarm  and  police  telegraph 
service,  which  is  practically  always  owned  and  operated  by 
the  city,  although  in  many  cases  the  service  is  connected  with 
the  telephone  system  or  with  an  auxiliary  fire  alarm  system 
of  a  private  company.  Signaling  systems  have  also  been 
established  to  provide  for  burglar  alarms,  night-watchmen’s 
service,  carriage  call  service,  and  ordinary  messenger  service. 
Electric  wires  are  sometimes  used  for  the  operation  of  clocks 
and  are  now  beginning  to  be  used  for  the  transmission  of 
music.  These  various  systems  of  signals  maintain  more  or 
less  close  relations  with  telephones  and  telegraphs,  partly  be¬ 
cause  the  signals  may  be  used  as  auxiliaries  of  the  telegraph 
and  telephone  business,  and  partly  because  they  use  the  same 
kind  of  wires,  which  may  be  conveniently  placed  in  the  same 
cables,  and  attached  to  the  same  poles  or  run  through  the 
same  ducts.  In  some  cases  telephone  companies  actually 
operate  the  messenger  service.  Not  infrequently,  however, 
companies  or  individuals  operating  these  various  signal  sys¬ 
tems  lease  the  poles,  wires  and  conduit  space  from  the  larger 
companies. 

169.  Maximum  rates,  option  to  purchase,  etc.  —  Grand 
Rapids,  Mich. — One  of  the  most  interesting  franchises  for  an 
electric  night-watch,  fire  service,  burglar  alarm,  and  messenger 
service,  of  which  the  writer  has  knowledge,  is  the  franchise 
granted  by  the  City  of  Grand  Rapids  October  30,  1905,  to 
the  Grand  Rapids  Messenger  and  Packet  Company.1  The 
grant  includes  the  right  to  enter  upon  the  streets,  bridges, 
alleys  and  public  places  of  the  city  for  the  purpose  of  con¬ 
structing,  maintaining  and  operating  conduits,  mains,  con¬ 
ductors,  etc.,  and  for  the  erection  of  poles,  wfires  and  other 
appliances  and  fixtures  for  light  tension  electric  service.  It 
is  provided,  however,  that  the  grantee  must  receive  permis¬ 
sion  from  the  council  for  each  respective  alley,  street  or  public 
place,  before  placing  fixtures  there.  The  poles  set  by  the 
grantee  in  connection  with  its  business  are  to  be  reasonably 
straight  and  of  such  height,  kind  and  quality  as  may  be 
approved  by  the  council.  The  grantee’s  conduits  are  to  be 
laid  in  a  line  parallel  with  the  curb  and  if  possible  within 
three  feet  of  it.  They  are  to  be  laid  under  the  supervision 
of  the  board  of  public  works  and  placed  in  such  parts  of  the 

1  Compiled  Ordinances,  1907,  p.  188. 


MESSENGER  AND  SIGNAL  FRANCHISES. 


351 


street  and  at  such  depth  as  the  board  may  direct.  However, 
after  any  conduit  has  been  laid,  it  is  not  to  be  changed  without 
the  consent  of  the  council.  The  city  reserves  the  right  to  use 
one  duct  in  each  conduit  for  the  city  fire  alarm  telegraph 
wdres.  Otherwise  the  conduits  are  to  be  used  exclusively  by 
the  grantee  in  the  business  described  in  the  franchise.  Wher¬ 
ever  possible,  the  grantee  must  use  alleys  in  place  of  streets 
and  avenues  in  the  construction  of  conduits  and  the  erection 
of  pole  and  wire  lines.  Wires  and  cables  are  not  to  be  put 
over  the  fire  alarm  telegraph  wires,  nor  within  25  feet  of 
the  ground  over  any  street  or  alley.  Wires  entering  any 
building  are  to  be  so  trained  and  arranged  in  accordance 
with  the  best  approved  methods  of  electric  wiring  as  to 
insulation  and  as  to  safety  from  fire  and  other  injuries  to 
persons  and  property  and  so  as  to  cause  the  least  possible 
obstruction.  The  grantee  is  required  to  comply  with  any 
ordinances  of  the  city  existing  at  the  time  of  the  grant  or 
thereafter  adopted,  relative  to  placing  wires  underground  and 
also  relative  to  poles  in  the  streets,  the  cutting  of  shade  trees, 
the  stringing  of  wires  through  trees,  etc.  At  least  24  hours 
before  any  street  is  to  be  opened  for  the  construction  or  repair 
of  a  conduit,  the  grantee  must  notify  the  board  of  public 
works,  and  all  work  done  in  the  street  by  the  grantee  must  be 
done  under  the  supervision  of  this  board.  No  street  may  be 
allowed  to  remain  open  or  encumbered  longer  than  necessary 
to  execute  the  work  for  which  it  was  opened;  and  whenever 
the  work  requires  special  skill,  as  in  the  laying  of  pavements 
or  the  setting  of  curbstones,  the  grantee  must  employ  only 
skilled  workmen  familiar  with  the  particular  kind  of  work 
they  have  to  do.  The  supervision  of  street  work  exercised 
by  the  board  of  public  works  is  to  be  without  expense  to  the 
city,  the  grantee  paying  the  cost  of  inspection.  After  the 
streets  have  been  restored  to  their  former  condition,  the 
grantee  is  required  to  maintain  the  pavements  in  good  repair 
for  a  period  of  three  years.  One  dollar  per  box  per  month 
for  a  watch  signal  station,  is  fixed  as  the  maximum  price 
for  the  grantee’s  services. 

It  is  provided  that  if  the  grantee  or  the  grantee’s  assigns 
shall  ever  consolidate  with  any  person  or  company  carrying 
on  a  similar  business  in  the  City  of  Grand  Rapids,  or  attempt 
to  do  so,  or  to  form  a  combination  precluding  or  tending  to 


352 


MUNICIPAL  FRANCHISES. 


preclude  competition  in  the  business,  the  ordinance  shall 
immediately  become  null  and  void.  Any  attempt  by  agree¬ 
ment  with  rivals  to  establish  rates  and  preclude  open  and 
free  competition  in  the  business  will  also  operate  as  a  for¬ 
feiture  of  the  franchise.  The  grant  is  not  assignable  except 
by  an  ordinance  of  the  common  council  passed  by  a  two-thirds 
vote  of  all  the  members  elect. 

It  is  expressly  agreed  by  the  grantee,  in  the  acceptance  of 
the  ordinance,  that  the  franchise  may  be  assessed  for  taxa¬ 
tion  as  an  asset  of  the  company.  The  term  of  the  franchise 
is  20  years,  and  the  grantee  is  required  to  pay  the  city  an 
annual  license  fee  of  $75.  It  is  provided  that  if  the  grantee’s 
business  should  increase  50  per  cent  within  5  years,  as  shown 
by  the  annual  reports  required  from  all  public  utility  cor¬ 
porations  under  the  city  charter,  the  annual  fee  shall  be 
proportionately  increased  after  the  expiration  of  the  five-year 
period.  Default  in  the  payment  of  the  fee  for  30  days  may 
work  a  forfeiture  of  the  franchise  at  the  option  of  the  council. 

At  the  expiration  of  15  years  from  the  time  of  the  grant, 
the  city  may  purchase  and  take  over  the  grantee’s  property 
and  plant  in  its  entirety,  upon  payment  of  a  fair  valuation  to 
be  determined  by  three  appraisers.  The  value  of  the  grantee’s 
franchise,  however,  is  not  to  be  taken  into  account  in  such 
appraisal.  In  case  of  purchase  the  grantee’s  plant  shall  be¬ 
come  the  property  of  the  city  as  soon  as  the  city  has  paid  for 
it  and  without  the  execution  of  any  instrument  or  conveyance 
from  the  grantee.  The  council  also  reserves  the  right  to  de¬ 
clare  the  franchise  forfeited  by  a  two-thirds  vote  of  all  the 
aldermen  elect  in  case  the  grantee  should  fail  to  render  suffi¬ 
cient  and  efficient  service  or  to  maintain  the  property  in  good 
order  and  repair  throughout  the  term  of  the  grant.  The 
council  reserves  the  right  to  amend  the  ordinance  “  at  any 
time  when  it  considers  and  deems  the  interest  and  welfare 
of  the  city  may  require  any  amendment  thereof  ”.  The  fran¬ 
chise  was  granted  subject  to  the  section  of  the  city  charter 
which  provides  for  the  optional  referendum  on  all  franchise 
ordinances.  On  this  particular  grant  the  referendum  was  not 
used,  however;  and  the  grantee  filed  a  written  acceptance  as 
required  by  the  council. 

On  June  17,  1907,  the  city  of  Grand  Rapids  gave  a  fran¬ 
chise  to  the  Michigan  Auxiliary  Fire  Alarm  Company, 


MESSENGER  AND  SIGNAL  FRANCHISES. 


353 


authorizing  it  to  use  any  streets  of  the  city  for  the  purpose  of 
stringing  wires  on  poles  or  placing  them  underground  in 
galvanized  pipes  in  connection  with  the  business  of  establish¬ 
ing  fire  alarm  boxes.1  Under  this  franchise  the  maximum 
rates  for  fire  alarm  boxes  were  to  be  “  $36  per  box  a  year 
for  three  boxes,  and  $10  per  year  for  each  additional  fire 
alarm  box  in  excess  of  three  boxes  furnished  to  each 
customer  The  common  council  reserved  the  right  to 
revise  these  rates  either  by  ordinance  or  by  a  reference  to 
arbitrators. 

170.  Use  of  other  poles;  amount  of  service;  rates,  etc.— 
Salt  Lake  City.  — An  interesting  franchise  was  granted 
December  8,  1897,  by  Salt  Lake  City  to  Gustavus  S.  Holmes, 
his  successors  and  assigns,  for  the  purpose  of  establishing  a 
messenger,  night-watch  and  fire  alarm  service.2  The  grant 
was  for  a  period  of  20  years  and  the  grantee  w^as  authorized 
to  erect  and  maintain  the  necessary  wires  and  other  appliances 
upon  the  poles  of  telegraph,  telephone,  electric  light  and 
railway  companies  within  the  paved  district  of  the  city,  under 
such  reasonable  regulations  and  for  such  compensation  as 
might  be  agreed  upon  between  the  grantee  and  the  owners  of 
the  poles.  It  was  specifically  provided  that  the  grant  should 
not  authorize  a  service  by  telephone.  Outside  of  the  paved 
districts  of  the  city  the  grantee  was  authorized  to  erect  poles 
of  his  own,  subject  to  the  laws  and  ordinances  of  the  city  and 
state  relative  to  this  matter.  The  grantee  was  required  to 
supply  the  city,  free  of  charge,  five  messenger  boxes  located 
in  specified  municipal  offices,  and  to  give,  during  the  life  of 
the  franchise,  free  official  communication  and  messenger  serv¬ 
ice  in  connection  with  these  boxes.  The  grantee’s  messenger 
service  was  to  be  in  full  operation  within  the  paved  district 
of  the  city,  with  not  less  than  six  uniformed  messengers,  by 
April  1,  1898.  The  maximum  charges  for  messenger  serv¬ 
ice,  when  performed  on  foot,  were  not  to  exceed  30  cents  per 
hour,  or,  when  performed  by  street  car,  35  cents  per  hour. 
A  penal  bond  in  the  sum  of  $5,000,  with  two  sureties  approved 
by  the  city  council,  was  to  be  executed  by  the  grantee, 
guaranteeing  the  city  against  damages  of  any  nature  that 
might  result  from  the  grantee’s  acts  or  from  the  exercise  of 
the  franchise.  Written  acceptance  of  the  franchise  was  re- 

1  Compiled  Ordinances,  op.  cit.,  supplement,  p.  14.  *  Ordinances,  p.  386. 


354 


MUNICIPAL  FRANCHISES. 


quired  to  be  filed  within  20  days  after  the  grant  had  been 
approved  by  the  mayor,  and  any  failure  to  comply  with  the 
terms  of  the  grant  was  to  work  an  absolute  forfeiture  of  it. 

171.  Construction  not  to  interfere  with  local  improve¬ 
ments;  relinquishment  of  former  rights— Seattle. — On  March 
2,  1904,  the  City  of  Seattle  granted  a  franchise  to  the 
Instantaneous  Alarm  Company  for  the  operation  of  auxiliary 
fire  alarm,  district  telegraph,  burglar  and  police  alarm 
systems.1  Under  this  grant  the  company  wa3  required  to 
use,  wherever  practicable,  poles  already  constructed  in  the 
streets.  The  company’s  wires  were  to  be  placed  in  conduits 
in  the  underground  district.  The  company’s  line  was  to  be 
constructed,  and  all  of  its  connections  with  fire  alarm  boxes 
made  under  the  direction  of  the  board  of  public  works.  It 
was  provided  that  nothing  in  the  ordinance  should  prevent  the 
city  from  making  any  street  improvement  without  being 
liable  for  damage  resulting  to  the  company;  and  the  company 
was  required,  whenever  the  grade  of  any  street  was  changed, 
or  the  extent,  size,  position  or  location  of  any  public  utility 
modified,  to  remove,  raise,  lower,  or  otherwise  modify  its 
structures  at  its  own  expense,  so  far  as  might  be  necessary. 
The  city  reserved  the  right  to  use  the  company’s  poles  for 
the  wires  of  the  city  fire  alarm  system,  police  patrol,  electric 
light  or  telegraph  system,  or  any  other  electric  system  ex¬ 
clusively  belonging  to  the  city,  without  making  any  compensa¬ 
tion  for  such  use  other  than  the  grant  of  the  franchise.  The 
city  also  reserved  the  right  to  use  all  surplus  space  which 
it  might  need  in  the  company’s  pipes  and  conduits  for 
similar  purposes  on  the  same  conditions.  The  company  was 
required  to  make  such  connections  with  the  police  and  fire 
department  headquarters  as  should  be  necessary  to  com¬ 
municate  to  them  any  alarms  received  over  its  lines.  The 
wires  of  the  company  were  to  be  carefully  insulated  through¬ 
out  their  whole  length  and  were  to  be  connected  and  fastened 
so  as  not  to  come  into  contact  with  any  object  through 
which  a  “  ground  ”  circuit  could  be  formed.  Before  taking 
up  any  sidewalk  or  digging  into  any  street  or  alley,  the  com¬ 
pany  was  required  to  file  with  the  board  of  public  works  a 
petition  with  a  diagram  drawn  to  scale,  setting  forth  the 
public  places  to  be  disturbed,  and  get  a  permit  for  the  work. 

1  Charter  and  Ordinances  of  Seattle,  1908,  p.  583. 


MESSENGER  AND  SIGNAL  FRANCHISES. 


355 


A  deposit  was  to  be  made  of  such  sum  of  money  as  the  board 
of  public  works  might  require,  to  be  used  by  the  city  for  the 
purpose  of  restoring  the  streets  and  side-walks  in  case  the 
company  failed  to  complete  its  work  within  a  reasonable  time, 
and  to  pay  the  city  the  reasonable  cost  of  any  necessary  inspec¬ 
tion.  The  company’s  wires  were  to  be  raised  or  removed  on 
48  hours’  notice  so  far  as  might  be  necessary  to  permit  the 
removal  of  any  building  for  the  removal  of  which  permission 
had  been  lawfully  obtained.  The  city  expressly  reserved 
the  right  to  repeal,  change  or  modify  the  ordinance  in  case 
the  franchise  was  not  operated  in  accordance  with  its  pro¬ 
visions,  or  at  all.  A  clause  was  inserted  making  it  unlawful 
for  any  unauthorized  person  to  interfere  with  the  company’s 
fixtures.  The  term  of  the  franchise  was  to  expire  December 
31,  1930,  and  within  30  days  after  the  passage  of  the 
ordinance  the  company  was  to  file  its  written  acceptance, 
together  with  a  relinquishment  and  surrender  of  all  the  rights 
and  privileges  it  held  under  former  franchise  grants. 

172.  An  electric  clock  franchise  —  Kansas  City- — On 
November  16,  1887,  Lumas  H.  Holmes  received  for  himself, 
his  successors  and  assigns,  a  franchise  to  erect  and  maintain 
wires  and  transmitters  on  the  streets  of  Kansas  City  for  a 
term  of  30  years,  “  for  the  purpose  of  conducting  electrical 
currents  to  be  used  in  running  and  regulating  electrical 
clocks  and  other  time-pieces  operated  by  electricity  and  for 
no  other  purpose  whatever  ”.1  The  city  reserved  the  right  at 
any  time  to  require  the  grantee’s  poles  to  be  taken  down  and 
his  wires  and  transmitters  to  be  placed  underground,  and 
also  to  require  that  any  pole,  wire  or  transmitter  should  be 
replaced.  Poles  could  not  be  erected  under  this  grant  until 
the  city  engineer  had  given  permission  in  writing  and 
designated  their  location.  The  grantee  was  to  indemnify  the 
city  for  any  expense  or  loss  caused  by  the  exercise  of  the 
franchise.  The  work  of  putting  up  the  system  of  clocks  and 
time-pieces  to  be  operated  by  electricity  was  to  be  commenced 
within  one  year  after  the  approval  of  the  ordinance,  and  at 
least  one-half  mile  of  wire  was  to  be  erected  and  put  into 
actual  use  within  six  months  after  the  work  was  commenced. 
In  default  of  such  action,  the  franchise  was  to  be  forfeited. 
The  grantee  was  required  to  file  a  written  acceptance  of  the 

1  Franchise  Ordinances  Cor  Public  Utilities,  Kansas  City,  1908,  p.  109. 


356 


MUNICIPAL  FRANCHISES. 


terms  and  conditions  of  the  ordinance.  This  acceptance  was 
filed  the  day  the  ordinance  was  approved.  Although  this 
franchise  is  published  in  the  official  collection  of  franchise 
ordinances  for  public  utilities,  issued  on  the  authority  of  the 
utilities  commission  of  Kansas  City  in  1908,  it  is  said  that 
the  electric  clock  enterprise  was  a  failure  and  has  long  since 
been  forgotten  by  the  citizens. 

173.  Routes  described ;  free  call  boxes  for  city— Denver.— 
It  is  difficult  to  explain  why  the  City  of  Denver,  in  all  its 
general  franchises,  should  waste  page  after  page  of  the  official 
documents  in  the  enumeration  of  a  large  proportion  of  the 
streets  and  alleys  of  the  city  as  the  streets  and  alleys  upon 
which  the  various  franchises  may  be  exercised.  It  is  obvious 
that  this  peculiar  exercise  of  municipal  discretion  operates  to 
increase  the  city’s  printing  bills,  a  consummation  devoutly  to 
be  wished  by  certain  citizens  in  every  community.  Perhaps, 
however,  the  practice  should  be  attributed  to  the  city’s  pride 
in  its  wonderful  street  names,  which  are  paraded  in  couples 
on  either  side  of  the  alleys  through  which  the  public  utility 
fixtures  are  to  run.  While  it  is  to  be  presumed  that  any 
ordinary  utility  service  running  through  the  alleys  between 
Josephine  and  Columbine,  Apple  and  Banana,  Lemon  and 
Melon,  Orange  and  Plum,  etc.,  would  be  highly  efficient  and 
so  attractive  as  to  result  in  a  rapid  and  profitable  expansion 
of  the  business,  there  may  be  some  doubt  as  to  the  effect  of 
such  an  environment  upon  the  promptness  of  messenger  serv¬ 
ice.  However  this  may  be,  by  a  franchise  granted  April  17, 
1890,  to  the  American  District  Telegraph  Company,  the  City 
of  Denver  made  legal  provision  for  a  local  messenger  service 
which  the  company  had  already  furnished  for  the  preceding 
seven  years  without  franchise  rights.1  Of  the  nine  printed 
pages  covered  by  this  ordinance,  eight  are  filled  with  the  list 
of  streets  and  alleys  upon  which  the  company  was  authorized 
to  operate.  The  only  conditions  attached  to  the  grant  were 
that  the  company  should  supply  on  request  of  the  mayor,  free 
of  charge,  messenger  boxes  in  the  city  hall  and  in  the  fire 
stations  situated  in  that  part  of  the  city  where  the  company’s 
lines  extended;  that  the  council  reserved  the  right  to  pass  any 
ordinance  with  reference  to  the  company’s  poles  and  wires, 
which  the  comfort  and  safety  of  the  people  might  require, 

1  Franchises  and  Special  Privileges,  Denver,  1907,  p.  749. 


MESSENGER  AND  SIGNAL  FRANCHISES. 


35? 


and  also  reserved  its  legislative  and  police  powers  and  func¬ 
tions  with  respect  to  the  streets;  that  the  term  of  the  grant 
should  be  limited  to  20  years:  and  that  the  company  should 
file  a  bond  in  the  sum  of  $10,000  to  indemnify  the  city 
against  damages  resulting  from  operation  under  the  grant. 
This  franchise  is  now  held  by  the  Colorado  Telephone  com¬ 
pany. 

174.  Auxiliary  fire  alarm  service— Harrisburg ;  Erie;  New 
York  City.  — A  franchise  was  granted  May  18,  1896,  by  the 
City  of  Harrisburg  to  the  Gamewell  Auxiliary  Fire  Alarm 
Company  “  to  construct  and  operate  its  auxiliary  system  and 
to  connect  manufacturing  establishments  and  others  ”  with 
its  system  under  rules  and  regulations  to  be  prescribed  by 
the  city  councils  and  subject  to  the  approval  of  the  chief 
engineer  of  the  fire  department  and  the  superintendent  of 
the  fire  alarm.1  The  company  was  authorized  to  connect  its 
auxiliary  system  with  the  fire  alarm  and  police  telegraph 
system  of  the  city,  at  its  own  expense.  The  use  of  the  poles 
of  the  fire  alarm  and  police  patrol  system  was  also  allowed  to 
the  company.  The  grant  was  not  exclusive.  The  company 
was  required  to  indemnify  the  city  against  damages  resulting 
from  the  exercise  of  the  franchise,  and  was  to  place,  in  con¬ 
sideration  of  the  grant,  an  auxiliary  fire  alarm  box  in  the 
mayor’s  office  and  another  in  the  city  clerk’s  office,  free  of 
cost  to  the  city,  and  to  pay  an  annual  license  tax  of  $10. 

In  Erie  the  American  District  Telegraph  Company, 
Limited,  secured  a  franchise  in  1884  “  for  telephonic  pur¬ 
poses  ”.2  Among  the  conditions  imposed  by  this  grant  was 
one  requiring  the  company  to  make  every  telephone  connected 
with  its  exchange  a  fire  alarm  signal  station  without  cost  to 
the  city,  and  to  keep  in  repair,  under  the  direction  of  the 
fire  committee,  the  fire  alarm  lines  of  the  city,  and  to  erect 
poles  and  wires  for  the  use  of  the  fire  department  at  such 
points  as  should  be  reasonably  necessary. 

In  1895  the  Pneumatic  Fire  Alarm  Telegraph  Company 
presented  a  petition  to  the  board  of  electrical  control  of  the 
City  of  New  York,  asking  for  a  franchise  or  permit  to  run 
electrical  conductors  for  signal  purposes  in  the  streets  of  the 
city.3  At  the  same  time  the  Manhattan  Fire  Alarm  Company 

1  City  Digest,  Harrisburg,  1908,  p.  434. 

*  Digest  of  Laws,  Ordinances,  etc.,  op.  cit.,  Part  II,  p.  219. 

*  Minutes  of  the  Board  of  Electrical  Control,  City  of  New  York,  Vol.  II.,  pp.  1442, 
1473,  1483.  - 


358 


MUNICIPAL  FRANCHISES. 


petitioned  for  a  similar  franchise.  The  committee  appointed 
to  consider  these  applications  reported  that  both  companies 
had  complied  with  the  laws  of  the  state  and  appeared  to  be 
financially  responsible  and  abundantly  able  to  serve  their 
customers  and  had  also  obtained  the  sanction  of  the  board  of 
fire  underwriters  and  permission  from  the  city  fire  depart¬ 
ment  to  connect  with  its  headquarters.  The  committee 
thought  that  the  companies  would  materially  assist  the  fire 
department.  The  franchises  W’ere  accordingly  granted  on 
condition  that  the  company’s  conductors  should  be  laid  by  the 
Empire  City  Subway  Company,  Limited,  which  owns  and 
operates  the  low  tension  electrical  conduits  of  the  city.  The 
variety  of  signal  enterprises  in  operation  in  old  New  York 
prior  to  consolidation,  is  indicated  by  the  list  of  companies 
reported  to  be  operating  low  tension  circuits  on  December 
31,  189 7.1  Besides  the  two  fire  alarm  companies  just  men¬ 
tioned,  the  New  York  Telephone  Company  and  the  several 
general  telegraph  companies  doing  business  in  the  city,  the 
list  included  the  American  District  Telegraph  Company  for 
local  messenger  service,  the  Holmes  Electric  Protective  Com¬ 
pany  for  burglar  alarm  service,  the  Mason  Carriage  Call 
Service,  the  Mercantile  Electric  Company,  the  New  York 
Thermostatic  Eire  Alarm  Company,  the  Automatic  Fire 
Alarm  and  Extinguisher  Company,  the  Special  Eire  Alarm 
and  Electric  Signal  Company,  and  the  Tubular  Dispatch 
Company.  The  company  last  mentioned  operated  certain 
electric  wires  as  an  auxiliary  to  the  operation  of  pneumatic 
tubes. 

175.  Compensation  to  the  city;  mode  of  arbitration  in 
case  of  purchase— Portland,  Ore.  — By  an  ordinance  approved 
April  8,  1904,  the  City  of  Portland  gave  a  twenty-five  year 
franchise  to  the  City  Messenger  and  Delivery  Company  for 
the  construction  and  maintenance  of  poles,  wires  and  conduits 
in  the  streets  “  for  the  transmission  of  electrical  currents,  to 
be  used  solely  and  exclusively  in  connection  wth  a  messenger 
system  and  service  and  a  call  box  system  ”.2  The  council 
reserved  the  right  at  all  times  “to  reasonably  regulate,  in 
the  public  interest,  the  rights,  privileges  and  franchises  ” 
granted  by  this  ordinance.  The  Executive  Board  of  the  city 

1  Minutes  of  Board  of  Electrical  Control,  op.  cit .,  Vol.  II.,  p.  1641. 

2  Revised  Ordinances  of  the  city  of  Portland,  Ore.,  in  force  Jan.  2, 1905,  op.  cit., 
p.  157. 


MESSENGER  AND  SIGNAL  FRANCHISES. 


359 


having  submitted  to  the  council  an  estimate  of  the  cash  value 
of  this  franchise,  the  company  was  required  to  pay  as  com¬ 
pensation  for  it  $100  a  year  for  the  first  five  years;  $200  a 
year  for  the  second  five  years;  $400  a  year  for  the  third  five 
years;  $600  a  year  for  the  fourth  five  years;  and  $800  a 
year  for  the  fifth  five  years  of  the  grant.  It  was  stipulated 
that  at  the  expiration  of  the  twenty-five  year  period  the  city 
might  “  at  its  election  and  upon  payment  therefor  ”  purchase 
the  company’s  property  and  plant  in  its  entirety  so  far  as  it 
was  situated  within  the  lines  of  the  streets  and  public  places 
or  used  in  connection  with  the  property  so  situated.  In  case 
of  purchase,  the  city  was  bound  to  pay  a  “  fair  valuation  ”, 
but  in  fixing  this  valuation  the  value  of  the  franchise  was  not 
to  be  taken  into  account.  Before  having  the  right  to  pur¬ 
chase,  however,  the  question  would  have  to  be  submitted  to 
the  voters  of  the  city  and  other  requirements  of  the  city 
charter  be  complied  with.  The  valuation  of  the  property 
was  to  be  fixed  by  arbitrators,  one  to  be  appointed  by  the  com¬ 
pany  and  the  other  by  the  council,  but  in  case  these  arbitrators 
were  unable  to  agree  upon  a  valuation  of  the  property  within 
a  reasonable  time,  they  were  to  elect  an  umpire.  In  case 
the  company  failed  to  select  an  arbitrator,  or  the  two  first 
selected  were  unable  to  agree  upon  an  umpire,  then  the 
council  of  the  city  of  Portland  was  to  appoint  “both  such 
arbitrators  and  umpire,  and  the  decision  of  a  majority  of  such 
arbitrators  shall  be  final  and  binding  as  to  the  valuation  ”  of 
the  property.  The  company  was  required  to  maintain  its  poles* 
conduits,  wires  and  messenger  and  call  box  systems  in  good 
order  and  repair  and  render  efficient  service  throughout  the 
term  of  the  grant.  In  case  of  failure  to  do  so  the  council 
might  declare  the  franchise  forfeited,  and  it  was  stipulated 
that  “  upon  adjudication  of  forfeiture  by  a  court  of  competent 
jurisdiction,  this  franchise  and  all  the  rights  and  privileges 
conferred  thereby  shall  become  and  be  null  and  void  99 .  It 
was  provided,  however,  that  no  decree  of  forfeiture  should  be 
made  in  case  the  company  remedied  its  default  before  the 
decree  was  rendered.  These  elaborate  provisions  applied  to 
a  franchise  under  which  the  estimated  total  cost  of  original 
construction  work  was  $2000  and  the  estimated  yearly  amount 
to  be  expended  on  the  plant  was  $1250.  The  erection  of  the 
company’s  poles,  the  construction  of  its  conduits  and  the 


360 


MUNICIPAL  FRANCHISES. 


placing  of  its  wires  were  to  be  subject  to  regulation  by  the 
Executive  Board  of  the  city. 

176.  Free  police  alarm  boxes  ;  city  may  use  poles— Butte.— 

By  an  ordinance  approved  May  20,  1891,  the  city  of  Butte, 
Mont.,  granted  to  the  Citizens’  District  Messenger  and  Bur¬ 
glar  Alarm  Telegraph  Company  the  right  for  twenty  years  to 
string  wires  over  and  across  the  houses  on  certain  streets  with 
the  consent  of  the  houseowners,  and  to  cross  the  streets  with¬ 
out  erecting  any  posts  or  poles  in  them.1  On  certain  other 
streets,  however,  the  company  was  authorized  to  erect  and 
maintain  poles  and  wires  on  condition  that  these  fixtures 
should  not  be  used  for  any  other  purpose  than  the  one  named 
in  the  grant,  or  by  any  other  company  without  the  city’s 
consent.  The  right  was  expressly  reserved  to  the  city  to  cut 
away  or  remove  any  poles  or  wires  in  case  of  necessity  on  the 
occasion  of  a  conflagration.  The  company  agreed  to  con¬ 
struct  and  maintain  without  expense  to  the  city  ten  “  police 
alarm  boxes  ”  to  be  used  in  case  of  fire.  The  company 
agreed  to  transmit  all  calls  from  these  boxes  and  to  furnish 
free  of  charge  all  necessary  instruments,  wires,  batteries,  etc., 
for  registering  the  calls  at  the  police  station.  In  case  the  city 
desired  any  additional  boxes,  the  company  was  to  furnish 
them  for  $35  each. 

On  April  29,  1893,  a  franchise  was  granted  to  certain 
individuals  to  construct  and  maintain  the  Gamewell  Auxiliary 
Eire  Alarm  system  to  be  connected  with  the  street  fire  alarm 
boxes  of  the  fire  department.2  It  was  expressly  provided  in 
this  ordinance  that  any  one  opening  a  signal  box  connected 
with  the  fire  alarm  system  of  the  city  or  with  the  auxiliary 
fire  alarm  system  of  the  grantees  for  the  purpose  of  giving 
a  false  alarm  of  fire  and  any  one  interfering  in  any  way  with 
the  signal  boxes  except  in  case  of  fire  should  be  liable  to  a 
penalty  of  from  $1  to  $100.  It  was  provided  that  the 
grantees  “  shall  have  no  rights  in  said  city  which  shall  be 
exclusive  or  which  shall  not  at  all  times  be  subject  to  con¬ 
trol  and  modification  by  the  City  Council  of  the  city  of 
Butte  ’’.  This  grant  also  was  for  a  period  of  twenty  years. 

Another  district  messenger  and  burglar  alarm  fanchise  was 
granted  August  2,  1893,  this  one  to  the  Fred  B.  Puddington 

I 

1  Franchise  Ordinances  of  the  City  of  Butte,  p.  442. 

*  Ibid.,  p.  488. 


MESSENGER  AND  SIGNAL  FRANCHISES. 


361 


Company.1  Under  this  franchise  the  company  was  to  furnish 
the  city  free  of  cost  “  ten  or  a  less  number  of  instruments 
to  be  used  in  the  public  buildings  ”.  Ten  police  alarm  boxes 
were  also  to  be  furnished  free  connected  with  the  company’s 
wires.  Additional  boxes  desired  by  the  city  were  to  be  fur¬ 
nished  at  the  rate  of  $25  each,  “  perfectly  connected  and  set 
in  operation  ”. 

On  April  17,  1895,  the  City  of  Butte  granted  a  franchise 
to  certain  individuals  “  for  the  purpose  of  constructing  a 
parcel  delivery  and  telegraph  call  system  within  said  city  ”.2 
These  grantees  were  required  to  furnish  eight  police  alarm 
boxes  free  of  charge  at  points  to  be  selected  by  the  proper 
authorities.  In  this  case  also  additional  boxes  furnished  the 
city  would  cost  $25  each. 

177.  Special  provisions  of  signal  franchises  in  various 
cities— Nashville;  Springfield,  Ill.;  Minneapolis. — On  April 
16,  1891,  the  City  of  Nashville  gave  a  franchise  to  the  Postal 
Telegraph  Cable  Company  for  the  maintenance  of  a  system 
of  “  messenger  district  telegraph  service  ”.3  Under  this 
franchise  the  company  had  no  right  to  erect  poles,  but  was 
required  to  place  its  wires  on  poles  already  in  the  streets, 
with  the  consent  of  the  owners,  or,  where  there  were  no  such 
poles  or  the  consent  of  the  owners  could  not  be  obtained, 
then  on  any  buildings  for  which  consents  could  be  obtained. 
It  was  provided  that  if  the  company,  at  the  date  of  the 
passage  of  the  ordinance,  had  already  erected  one  or 
more  wires,  it  should  immediately  furnish  a  list  of  them  to 
the  board  of  public  works  and  affairs  and  should  remove 
them  if  they  were  not  found  to  be  strung  in  compliance  with 
the  ordinance. 

A  franchise  granted  by  the  City  of  Springfield,  Ill., 
March  31,  1893,  to  certain  individuals  is  of  special  interest 
because  of  the  full  statement  it  contained  of  the  purposes  of 
the  grant.4  It  was  provided  that  the  grantees  should,  within 
12  months  from  the  approval  of  the  ordinance,  establish  and 
maintain  within  the  city  “  a  system  of  police  and  fire  alarm 
and  district  messenger  service  through  the  agency  of  elec¬ 
trical  and  mechanical  appliances,  metallic  conductors,  bat- 

t 

1  Franchise  Ordinances,  op.  cit.,  p.  496. 

*  Ibid.,  p.  502. 

*  Laws  of  Nashville,  op.  cit.,  p.  994. 

*  Franchise  Ordinances,  City  of  Springfield,  1907,  p.  19. 


362 


MUNICIPAL  FRANCHISES. 


teries,  agents  and  messengers,  whereby  the  residents  of  said 
City  of  Springfield,  patrons  thereof,  may  give  timely  notice 
of  all  demands  for  police  and  fire  service  to  the  propeT 
departments  of  said  city,  and,  in  addition  thereto,  may  at 
all  times,  from  a  central  depot  for  that  purpose  to  be  estab¬ 
lished  and  maintained,  secure  the  prompt  attendance  of 
messengers  for  immediate  messenger  service  to  any  part  of 
the  city  ”.1  This  grant  was  for  a  period  of  20  years. 

In  a  franchise  granted  April  7,  1883,  by  the  City  of 
Minneapolis  to  the  American  District  Telegraph  Company 
for  the  maintenance  of  a  district  telegraph,  burglar,  police 
and  fire  alarm  system,  it  Was  provided  that  the  company 
should  at  once  establish  “  a  complete  circuit  to  include  its 
own  central  office,  headquarters  of  fire  department,  police 
headquarters  and  chemical  engine  house  ”,  and  should,  sub¬ 
ject  to  the  approval  of  the  chiefs  of  the  fire  and  police  de¬ 
partments,  “  put  in  all  apparatus  and  perfect  all  connections 
required  in  order  to  enable  those  having  the  call  boxes  of 
said  company  to  instantly  summon  either  of  said  depart¬ 
ments  -whenever  necessary  ”. 

178.  Modern  franchise  for  general  signaling  service— 
New  York  City. — On  June  11,  1909,  the  Board  of  Estimate 
and  Apportionment  of  New  York  City  granted  a  franchise 
to  the  United  Electric  Service  Company  for  the  Borough  of 
Manhattan  for  the  operation  of  “  an  electrical  signal  system 
for  the  calling  of  messengers,  an  electrical  burglary  alarm 
system  and  a  fire  alarm  system,  and  for  no  other  purpose 
whatsoever  ”.2  The  term  of  the  grant  was  to  be  15  years,  with 
the  right  of  renewal  for  10  years.  The  property  in  the 
streets  was  to  revert  to  the  city  without  cost  at  the  termina¬ 
tion  of  the  original  or  renewal  period.  The  city  was  to  re¬ 
ceive  $5,000  in  cash  for  the  franchise  and  annual  payments 
ranging  from  a  minimum  of  $1,200  or  2  per  cent  of  the  gross 
receipts  during  the  first  5  years,  to  $4,500  or  4  per  cent  of 
the  gross  receipts  during  the  last  5  years  of  the  original 
grant.  In  case  of  renewal  there  was  to  be  a  revaluation  of 
the  franchise  either  by  agreement  or  by  appraisal;  and  the 
annual  rate  of  payment  for  the  renewal  period  was  not  in 
any  case  to  be  less  than  the  sum  required  to  be  paid  during 

1  Charter,  Ordinances,  etc.,  op.  cit .,  p.  598. 

3  For  form  of  contract  between  city  and  company,  see  City  Record.  May  14, 

1909,  p.5657. 


MESSENGER  AND  SIGNAL  FRANCHISES. 


363 


the  last  year  of  the  original  grant.  The  compensation  pro¬ 
vided  for  was  not  to  be  considered  as  a  tax  or  in  lieu  of  taxes. 
The  company  was  not  to  assign  its  franchise,  consolidate  with 
another  company  or  enter  into  any  agreement  to  prevent 
competition  without  the  consent  of  the  board  and  was  to 
install  messenger  call  boxes  or  fire  alarm  signals  in  city  of¬ 
fices  and  furnish  service  at  75  per  cent  of  the  regular  rates. 
The  company’s  construction  work  and  the  operation  of  its 
system  were  to  be  under  the  supervision  of  the  city  author¬ 
ities,  and  all  the  company’s  wires  and  cables  were  to  be  placed 
in  conduits  to  be  leased  from  the  companies  controlling  them 
under  contract  with  the  city.  The  company  was  to  have 
2,000  messenger  call  boxes  in  operation  within  two  years  and 
to  file  with  the  board  of  estimate  maps  showing  the  loca¬ 
tion  of  its  ducts  and  wires.  Absolute  power  to  regulate  the 
charges  of  the  company  for  the  service  it  rendered  was  to  be 
reserved  to  the  board  of  estimate,  limited  only  by  the  pro¬ 
vision  that  the  rates  so  fixed  should  be  reasonable  and  fair 
and  also  by  the  maximum  rates  for  messenger  service  fixed 
in  the  ordinance.  The  maximum  rates  referred  to  were  as 


follows : 

For  10  city  blocks .  10  cents. 

For  11  to  15  city  blocks . . . 15  cents. 

For  16  to  20  city  blocks .  ...  20  cents. 

For  20  to  30  city  blocks .  30  cents. 

For  each  additional 

20  city  blocks .  5  cents. 


It  may  be  stated  that  in  the  Borough  of  Manhattan  it 
takes  about  20  city  blocks  to  make  a  mile.  It  was  provided 
that  the  company  should  not  receive  from  its  subscribers 
any  deposit  or  advance  payment  in  excess  of  what  wras  rea¬ 
sonably  necessary  to  insure  the  payment  of  current  bills, 
and  that  the  company  should  pay  interest  at  the  statutory 
rate  on  any  such  deposits  held  by  it  for  more  than  a  month. 
Unpaid  bills,  unless  due  from  the  owner,  were  not  to  be 
charged  against  the  property;  and  no  person  not  himself  in 
arrears  was  to  be  denied  service  because  any  previous  occu¬ 
pant  of  the  same  premises  had  not  paid  the  company  for  its 
service.  The  company  was  to  keep  accurate  books  of  ac¬ 
count  and  make  a  verified  report  to  the  city  comptroller  once 
a  year.  The  company  was  also  to  submit  annually  to  the 
board  of  estimate  a  report  giving  the  amount  of  its  stock 


364 


MUNICIPAL  FRANCHISES. 


issued  for  cash  and  for  property,  the  amount  of  its  funded 
and  floating  debt,  the  average  rate  of  interest  paid  on  its 
bonds,  the  amount  of  dividends  paid  during  the  year,  the 
amount  paid  for  damages,  the  total  income  of  the  year  in 
detail,  the  total  expense  for  operation,  including  salaries, 
and  such  other  information  in  regard  to  its  business  as  might 
be  required  by  the  board.  Most  of  these  provisions  and  some 
others  which  I  have  not  described,  are  in  accordance  with 
the  standard  form  of  franchise  adopted  by  the  city  au¬ 
thorities  of  Greater  New  York  within  the  last  few  years. 

179.  Transmission  of  music  by  electricity  proposed  in 
New  York. — On  May  10,  1907,  the  New  York  Cahill  Telhar- 
monic  Company  applied  to  the  board  of  estimate  and  ap¬ 
portionment  of  New  York  City  for  a  franchise  for  the 
purpose  of  generating  and  distributing  music  electrically.1 
The  company  had  been  incorporated  under  the  Transporta¬ 
tion  Corporations  law,  as  amended  by  the  laws  of  1907  to  per¬ 
mit  the  formation  of  companies  for  this  purpose  with  powers 
and  duties  similar  to  those  of  telegraph  and  telephone  com¬ 
panies.  In  reporting  upon  this  application,  Engineer  Harry 
P.  Nichols  stated  that  the  company’s  equipment  would  con¬ 
sist  of  a  distributing  plant  and  a  central  station.  At  the  cen¬ 
tral  station  the  company  would  have  the  apparatus  used  to 
generate  and  control  the  music.  It  was  said  that  the  plant 
already  in  existence  had  cost  about  $300,000  and  consisted 
of  numerous  alternating  current  dynamos  and  “  keyboards 
similar  to  that  of  a  piano,  upon  which  the  musicians  play  in 
order  to  produce  any  class  of  music  within  the  range  of  the 
apparatus  ”.  “  The  keys  ”,  continued  Mr.  Nichols,  “  are 

really  electric  switches,  each  controlling  an  electric  circuit 
of  one  or  more  dynamos.  The  frequency  of  pulsation  of  the 
current  produced  by  each  dynamo  is  identical  with  the  fre¬ 
quency  of  sound  waves  required  to  produce  a  certain  musical 
tone.  These  electrical  waves  are  changed  into  sound  waves 
by  means  of  the  ordinary  telephone  receiver.  Thus,  when 
the  player  closes  the  electric  circuit  by  operating  the  keys 
upon  the  keyboard,  he  completes  an  electric  circuit  which 
carries  the  electric  waves  produced  by  the  dynamos  to  the 
point  of  music  outlet,  such  as  a  dwelling,  hotel,  restaurant, 
music  hall,  etc.  At  the  point  of  music  outlet,  a  telephone 

1  Report  by  the  Division  of  Franchises,  May  31,  1907. 


MESSENGER  AND  SIGNAL  FRANCHISES. 


365 


receiver  is  attached;  here  the  pulsation  of  the  current  is 
changed  by  means  of  the  diaphragm  in  the  telephone  re¬ 
ceiver  into  sound  waves  having  the  same  frequency  as  that 
of  the  current  in  the  wire.  The  music  thus  produced  may 
be  made  to  imitate  closely  other  musical  instruments,  such 
as  the  piano,  flute,  violin,  etc.  Representatives  of  the  com¬ 
pany  state  that  when  a  more  complete  equipment  is  installed, 
it  will  be  quite  possible  to  imitate  a  full  orchestra.”  Mr. 
Nichols  said  that  each  subscriber  to  the  service  was  to  be 
provided  with  one  or  more  outlets  which  could  be  governed 
by  the  subscriber  as  to  the  kind  and  volume  of  music  de¬ 
sired.  He  was  to  be  furnished  a  switch  for  regulating  the 
force  and  volume  of  the  sound.  By  another  switch  he  could 
govern  the  class  of  music,  that  is  to  say,  he  could  turn  it  one 
way  and  get  the  effect  produced  by  a  piano,  or  turn  it  an¬ 
other  way  and  get  the  effect  produced  by  a  full  orchestra, 
and  so  on. 

Mr.  Nichols  recommended  a  form  of  franchise  to  be 
granted  to  this  company,  but  no  action  has  been  taken  upon 
it.  The  franchise  was  to  run  for  a  period  of  25  years,  with 
the  privilege  of  renewal  for  25  years  more  upon  a  proper 
revaluation.  The  company’s  property  in  the  streets  was  to 
revert  to  the  city  without  cost  at  the  end  of  the  grant  or  be 
removed  by  the  company,  at  the  option  of  the  board  of 
estimate.  The  city  was  to  receive  $25,000  in  cash  for  the 
franchise  and  a  minimum  payment  of  $5,000  a  year,  or 
1  per  cent  of  the  company’s  gross  receipts,  for  the  first 
5  years;  $10,000  a  year,  or  2  per  cent  of  the  gross  receipts, 
for  the  second  5  years ;  $20,000  a  year,  or  3  per  cent 
of  the  gross  receipts,  for  the  third  5  years;  $35,000  a  year, 
or  4  per  cent  of  the  gross  receipts,  for  the  fourth  5  years; 
and  $60,000  a  year,  or  5  per  cent  of  the  gross  receipts,  dur¬ 
ing  the  last  5  years  of  the  original  grant.  The  right  was  to 
be  reserved  to  the  board  to  direct  the  company  to  install, 
free  of  charge,  “  music  outlets  ”  and  the  necessary  appurten¬ 
ances  in  all  the  free  wards  of  the  city  hospitals  situated  in 
the  territory  for  which  the  franchise  was  granted.  The 
board  was  also  authorized  to  direct  the  company  to  install, 
free  of  charge,  “  music  outlets  ”  in  the  assembly  halls  of  the 
public  schools.  It  was  provided,  however,  that  the  company 
should  not  be  required  to  extend  its  wires  to  a  greater  dis- 


366 


MUNICIPAL  FRANCHISES. 


tance  than  2,500  feet  for  the  purpose  of  connecting  with  any 
school,  and  the  company  would  not  be  compelled  to  equip 
more  than  10  schools  a  year  except  schools  situated  within 
blocks  bounded  by  streets  in  which  the  company  had  wires. 
The  music  for  hospitals  was  to  be  furnished  free,  and  for 
the  public  schools  at  one-third  of  the  regular  rates  to  private 
patrons.  The  franchise  was  not  to  be  assigned  without  the 
consent  of  the  board,  and  the  company  was  "to  commence 
construction  within  six  months  and  have  4,000  “  music  out¬ 
lets  ”  in  operation  within  three  years.  The  right  to  change 
and  regulate  rates  was  to  be  reserved  to  the  board  of  esti¬ 
mate.  The  company  was  not  to  require  any  excessive  deposits 
or  advance  payments  from  its  subscribers,  and  unpaid  bills 
were  never  to  be  charged  against  the  property  occupied  by 
the  subscriber. 


CHAPTER  XII. 


ELECTRICAL  CONDUITS. 


180.  Various  ways  of  providing  electrical 

conduits. 

181.  Important  features  of  conduit  fran¬ 

chises. 

182.  General  franchises  for  all  wire  using 

companies. — St.  Louis  ;  Nashville. 

183.  A  monopoly  franchise  in  the  form 

of  a  contract. — New  York  City. 

184.  General  systems  of  municipal  con. 


duits.— Baltimore  ;  Erie,  Pa. ;  New 
Britain,  Conn. 

185.  Conduit  franchises  incidental  to 

other  public  utility  services.— Chi¬ 
cago  ;  Troy  ;  Rochester  ;  Buffalo. 

186.  Independent  conduit  franchises, 

not  exclusive.— Syracuse  ;  Kansas 
City  ;  Minneapolis  ;  Duluth. 

187.  Electrical  conduits  in  the  city  of 

Washington. 


180.  Various  ways  of  providing  electrical  conduits. — The 

need  for  conduits  or  subways  for  electrical  conductors  in 
cities  is  based  upon  two  important  facts.  In  the  first  place, 
the  presence  of  a  multiplicity  of  overhead  wires  in  the 
streets  is  both  unsightly  and  dangerous.  In  the  second  place, 
the  exposure  of  overhead  wires  to  various  forms  of  inter¬ 
ference  renders  the  overhead  system  of  maintenance  ex¬ 
pensive.  This  trouble  is  due  not  only  to  unusual  wind  and 
snow  storms,  which  are  likely  to  blow  over  poles  or  break 
down  wires,  but  also  to  the  interference  of  growing  trees 
and  occasional  interferences  in  connection  with  fires  or  the 
moving  of  buildings  through  the  streets.  For  these  reasons 
electrical  conduits  or  subways  have  become  a  necessity  in  the 
business  portions  of  all  important  cities.  The  electrical  con¬ 
duit,  as  a  public  utility,  is  peculiar.  It  is  a  utility  for  utili¬ 
ties,  rather  than  for  individuals.  In  other  words,  conduits 
are  built,  not  for  the  use  of  individual  patrons,  but  for  the 
use  of  the  various  companies  which  are  themselves  render¬ 
ing  various  kinds  of  public  service  requiring  the  maintenance 
of  electrical  conductors  in  the  streets.  On  account  of  this 
peculiar  condition,  provision  for  conduits  has  been  made  in 
a  variety  of  ways.  Perhaps  the  most  usual  method  is  by 
ordinance  requiring  each  company  maintaining  wires  in  the 

367 


368 


MUNICIPAL  FRANCHISES. 


streets  to  place  them  underground.  Under  such  circum¬ 
stances,  electrical  conduits  are  merely  a  special  kind  of  con¬ 
struction  connected  with  each  individual  utility.  The 
limited  amount  of  sub-surface  space  in  the  streets  and  the 
great  disadvantage  arising  from  the  digging  up  of  pave¬ 
ments  by  many  different  companies  at  different  times,  have 
combined,  however,  to  induce  co-operation  in  many  cases. 
This  co-operation  may  take  several  forms.  The  several  com¬ 
panies  may  be  required  to  lay  their  conduits  at  the  same  time 
and  in  the  same  trenches,  or  one  company  may  be  permitted 
to  lay  conduits  with  sufficient  duct  space  to  accommodate,, 
for  a  proper  rental,  all  other  companies  having  wires  in  the 
streets,  or  an  independent  conduit  company  may  be  given  a 
franchise  for  the  sole  purpose  of  building  electrical  subways 
to  be  rented  to  all  electrical  companies  not  having  conduits 
of  their  own.  It  is  only  one  step  from  this  last  method  to 
that  adopted  in  New  York  City,  where  by  special  contract 
the  electrical  subway  company  was  given  a  monopoly  of  the 
construction  of  the  necessary  conduits,  subject  to  municipal 
regulation.  The  difficulties  arising  from  these  various  modes 
of  providing  conduits,  have  led  the  cities  in  a  number  of  in¬ 
stances  to  construct  municipal  conduits  and  to  compel  their 
use  by  the  various  companies  maintaining  electrical  con¬ 
ductors. 

181.  Important  features  of  conduit  franchises. — In  grant¬ 
ing  a  franchise  for  the  construction  of  electrical  conduits, 
a  city  has  first  to  consider  the  necessity  of  maintaining  its 
control  over  the  sub-surface  space  in  the  streets  and  in  pre¬ 
venting  any  unnecessary  destruction  of  street  pavements  or 
interference  with  street  traffic.  The  removal  of  all  over¬ 
head  wires  in  the  congested  portion  of  a  city  and  the  pro¬ 
viding  of  locations  for  them  underground,  impose  an  added 
burden  of  considerable  magnitude  upon  the  available  sub¬ 
surface  space.  Ordinarily,  conduits  must  be  placed  on  both 
sides  of  the  street.  They  are  more  bulky  than  most  other 
sub-surface  structures.  It  is  imperative,  therefore,  that  they 
should  be  laid  strictly  under  the  supervision  of  the  public 
authorities  and  in  accordance  with  a  general  plan,  so  as  not 
to  interfere  with  existing  structures  any  more  than  is  neces¬ 
sary.  Conduits  have  these  advantages;  that  they  do  not 
have  to  be  placed  below  the  frost  line  and  do  not  have  to  be 


ELECTRICAL  CONDUITS. 


369 


constructed  with  reference  to  the  influence  of  gravity.  It 
is  only  necessary  that  they  be  placed  far  enough  below  the 
street  surface  to  be  protected  from  damage  through  heavy 
traffic. 

Another  matter  of  equal  importance  in  connection  with 
any  conduit  franchise,  is  the  provision  that  the  conduits 
shall  be  so  constructed,  with  such  dividing  walls,  man-holes 
and  system  of  ventilation,  as  to  render  their  use  as  safe  and 
economical  as  possible.  Particular  provision  must  be  made 
to  prevent  explosions  through  the  collection  of  gas  in  the 
conduits  and  man-holes  and  also  to  prevent  damage  and  in¬ 
terference  with  service  by  electrolysis,  caused  by  insufficient 
insulation  or  improper  separation  of  high  tension  from  low 
tension  wires. 

After  providing  for  continuous  control  of  the  streets  and 
the  efficiency  of  the  conduits  from  a  mechanical  standpoint, 
it  remains  for  the  city  to  control  the  use  of  the  conduits. 
The  expensiveness  of  conduit  construction  and  the  existence 
of  ordinances  forbidding  overhead  wires,  give  to  a  company 
having  a  system  of  conduits  already  in  the  streets  a  great 
advantage  over  other  companies  seeking  to  establish  an  elec¬ 
trical  service  either  of  the  same  or  of  a  different  kind.  Com¬ 
panies  operating  auxiliary  fire  alarm  or  district  messenger 
wires,  for  example,  can  ill  afford  to  go  to  the  expense  of  con¬ 
structing  an  entirely  separate  system  of  conduits  for  their 
own  use.  When  the  most  available  space  has  already  been 
occupied  by  others,  it  is  a  great  burden,  even  upon  a  corpo¬ 
ration  supplying  an  important  service  like  the  telephone  or 
electric  light  and  power,  to  install  a  new  system  of  conduits. 
For  these  reasons  it  is  always  important  that  the  city  should 
provide  in  its  conduit  franchise  that  the  use  of  duct  space 
shall  be  granted  without  discrimination  to  all  applicants 
with  proper  credentials,  and  that  the  rental  rates  shall  be 
subject  to  municipal  regulation  or  to  arbitration. 

It  is  also  generally  regarded  as  important  that  provision 
should  be  made  in  conduit  franchises  for  the  right  of  the 
city  to  purchase  the  conduits  within  a  reasonable  period  of 
time.  Because  of  the  fact  that  the  use  of  the  electrical  con¬ 
duit,  like  the  use  of  the  street  itself,  is  necessary  to  various 
public  service  companies  for  the  performance  of  their  func¬ 
tions,  there  is  a  very  general  acceptance  of  the  idea  that  con- 


370 


MUNICIPAL  FRANCHISES. 


duits  are  a  legitimate  and  ultimately  necessary  subject  for 
municipal  ownership.  Indeed,  as  it  is  often  urged  that  street 
railway  tracks  should  be  owned  by  the  city  as  a  part  of  the 
permanent  way  of  the  street,  so  with  at  least  as  much  force 
it  may  be  argued  that  the  conduit  should  be  owned  by  the 
city  as  a  subway  for  limited  use. 

182.  General  franchises  for  all  wire-using  companies — 
St.  Louis ;  Nashville. — By  an  ordinance  approved  Septem¬ 
ber  8,  1896,  the  City  of  St.  Louis  established  an  underground 
conduit  district,  within  which  all  wires,  tubes  or  cables  con¬ 
ducting  or  transmitting  electricity,  except  clock,  burglar 
alarm,  commercial  printer,  night  watch,  and  other  messenger 
call-box  wires  carrying  currents  for  low  tension  and  not 
fastened  to  poles,  were  to  be  placed  underground.1  There 
was,  of  course,  the  necessary  exception  for  electrical  con¬ 
ductors  placed  inside  of  posts  or  brackets,  used  in  connecting 
lamps  or  signal  boxes  with  underground  conductors,  and  also 
for  such  wires  and  cables  as  were  necessary  for  local  dis¬ 
tribution.  It  was  provided  that  any  person  or  company 
already  authorized,  or  that  might  be  authorized  within  90 
days  from  the  passage  of  the  ordinance,  to  operate  electrical 
conductors  for  public  use  and  desiring  to  place  them  under¬ 
ground,  should  have  authority  to  construct  conduits.  This 
authority  was  conditioned,  however,  upon  the  granting  of  a 
permit  by  the  board  of  public  improvements  upon  applica¬ 
tion  accompanied  by  detailed  plans  showing  the  route, 
capacity  and  dimensions  of  the  conduits,  ducts,  man-holes 
and  other  appurtenances  to  be  constructed.  Upon  receiving 
any  application  for  such  a  permit,  the  board  was  required 
to  give  15  days’  public  notice  of  a  hearing  on  the  applica¬ 
tion,  this  notice  to  include  a  statement  of  the  streets  and 
alleys  in  which  the  applicant  desired  to  build  conduits.  It 
was  provided  that  after  this  hearing  the  board  “  shall  con¬ 
sider  all  of  the  applications,  statements,  plans  and  details 
presented,  and  examine  into  the  space  available  for  conduits 
or  ducts  under  the  streets,,  alleys  and  public  places  named  in 
the  advertisement,  and  shall  decide  upon,  prepare  and  ap¬ 
prove  such  plans,  details,  construction,  conduits,  ducts,  man¬ 
holes,  materials  and  conditions,  as  in  their  opinion  the  public 
interests  seem  to  demand  ”.  The  board  was  required  to  in- 

1  Ordinance  No.  18,680.  See  Report  of  Electrical  Commission  of  Baltimore  City. 

1896,  p.  183. 


ELECTRICAL  CONDUITS. 


371 


elude  in  its  plans  enough  ducts,  man-holes,  etc.,  for  the  use 
of  the  police  and  fire  alarm  circuits  and  telephone  service  of 
the  city,  to  be  constructed  and  maintained  by  the  parties  re¬ 
ceiving  the  permit  and  to  be  used  by  the  city  free  of  charge. 
If  more  than  one  application  was  presented  at  the  same  time, 
the  board  was  authorized  to  compel  all  applicants  to  build 
and  maintain  joint  conduits,  the  expense,  in  case  of  disagree¬ 
ment  among  the  interested  parties,  to  be  apportioned  by  the 
board.  It  was  provided  that  all  parties  failing  to  appear 
and  submit  applications  on  the  day  of  the  public  hearing,  or 
failing  to  accept  in  writing  the  apportionment  of  costs  made 
by  the  board  within  10  days  after  receiving  notice  of  the 
board’s  finding,  should  be  excluded  from  all  right  to  obtain 
conduit,  duct  or  man-hole  facilities  in  the  particular  streets 
or  portions  of  streets  named  in  the  notice  of  the  hearing. 
It  was  provided,  however,  that  for  all  streets  not  then  as¬ 
signed  or  which,  having  been  assigned,  should  not  be  oc¬ 
cupied  as  contemplated  by  the  ordinance,  applications  and 
assignments  could  be  made  at  a  later  time.  The  board  was 
required  to  grant  permits,  according  to  the  terms  of  the  ordi¬ 
nance,  to  any  properly  authorized  person  or  company  filing 
with  the  proper  city  officer  a  bond  in  the  sum  of  $50,000  to 
protect  the  city  from  damages  that  might  arise  in  connection 
with  the  underground  construction  contemplated  and  as  a 
guaranty  that  all  laws  and  ordinances  concerning  conduits, 
ducts  and  underground  wires  would  be  complied  with. 

The  city  reserved  the  right  to  purchase,  at  any  time  after 
15  years  from  the  date  of  this  general  ordinance,  all  the 
conduits  or  ducts  constructed  under  its  authority.  In  case 
the  city  desired  to  exercise  this  option,  it  was  required  to 
pass  an  ordinance  authorizing  the  purchase  of  any  or  all  of 
the  ducts.  Thereupon  the  mayor,  the  comptroller  and  the 
president  of  the  board  of  public  improvements,  or  a  majority 
of  them,  were  authorized  to  give  30  days’  notice  in  writing 
to  any  owner  or  occupant  of  any  conduit,  of  the  city’s  inten¬ 
tion  to  purchase  the  whole  or  any  part  of  it,  at  a  valuation 
to  be  determined  by  three  arbitrators,  one  to  be  chosen  by  the 
mayor,  one  by  the  owner  or  occupant,  and  the  third  by  the 
other  two.  In  case  of  failure  to  agree  upon  the  third  arbitra¬ 
tor,  he  was  to  be  appointed  within  a  specified  time  by  the 
presiding  judge  of  the  St.  Louis  Circuit  Court.  Each  of  the 


372 


MUNICIPAL  FRANCHISES. 


parties  to  the  arbitration  was  to  pay  one-half  of  the  arbitra¬ 
tors*  fees,  which  were  limited  to  $50  a  day  for  each  arbitrator 
while  actually  employed  in  making  the  award.  After  the 
award  had  been  filed,  the  city  was  given  90  days  within 
which  to  pay  the  amount  determined  and  take  possession  of 
the  conduits. 

It  was  required  that  all  conduits,  ducts,  man-holes,  etc., 
should  be  maintained  by  their  owners  without  cost  to  the  city, 
to  the  satisfaction  of  the  board  of  public  improvements. 
Failure  to  observe  this  requirement  would  constitute  a  breach 
of  the  bond  to  which  reference  has  been  made.  The  city 
reserved  the  right  at  all  times  to  inspect,  superintend  and 
control  the  construction  of  the  work  and  to  order  any 
changes  from  time  to  time,  either  in  the  construction,  the 
material,  or  the  manner  of  maintenance,  or  any  changes  in 
the  locations  in  the  street.  All  such  changes  or  alterations 
were  to  be  made  without  expense  to  the  city.  Whenever  the 
plans  approved  by  the  board  of  public  improvements  required 
two  or  more  applicants  for  conduits  to  use  a  common  trench, 
all  such  applicants  were  to  carry  on  their  work  of  construction 
as  nearly  at  the  same  time  as  possible,  and  any  company  re¬ 
fusing  to  fulfill  this  requirement  in  the  manner  directed  by 
the  board,  would  be  deemed  to  have  waived  its  right  to  con¬ 
duit  privileges  at  the  particular  point  in  question.  Any  per¬ 
mit  granted  under  the  ordinance  would  become  void  unless 
work  was  commenced  within  60  days  and  proceeded  with 
continuously  in  good  faith  until  completion.  This  ordi¬ 
nance  was  not  to  apply  to  existing  companies  authorized  to 
maintain  their  wires  under  contract  for  lighting  the  streets 
of  the  city,  unless  such  companies  should  accept  the  terms 
of  the  ordinance  and  file  a  release  of  the  city  from  its  agree¬ 
ment  to  pay  a  portion  of  the  expense  of  placing  their  wires 
underground.  The  rights  conferred  and  authorized  by  this 
ordinance  were  to  terminate  April  15,  1940,  and  until  that 
time  the  prices  charged  to  customers  for  telephone  and  elec¬ 
tric  light  and  power  service  by  companies  obtaining  under¬ 
ground  conduit  privileges  were  not  in  any  case  to  exceed  the 
prices  charged  for  similar  service  on  January  1,  1896.  No 
person  or  corporation  building  conduits  under  this  ordi¬ 
nance  was  to  have  the  right  to  lease  or  sublet  space  in  the 


ELECTRICAL  CONDUITS.  373 

conduits,  or  to  use  the  conduits  for  any  other  purpose  than 
that  required  by  the  grantee’s  individual  needs. 

Another  general  ordinance  of  a  somewhat  similar  nature 
is  that  adopted  by  the  City  of  Nashville,  June  30,  1906,  pro¬ 
viding  for  the  removal  of  overhead  telegraph,  telephone,  elec¬ 
tric  light  and  other  electric  service  lines  within  a  prescribed 
district  prior  to  July  1,  1907. 1  Under  this  ordinance  com¬ 
panies  were  required  to  make  written  application  for  permits 
to  the  board  of  public  works,  stating  in  detail  the  plan  of 
the  conduits  they  proposed  to  construct.  It  was  required 
that  this  plan  should  show: 

(1)  the  materials  to  be  used ; 

(2)  the  number  and  size  of  ducts  necessary  for  the  reception  of  wires 

then  in  operation ; 

(3)  the  number  and  size  of  ducts  necessary  for  the  reception  of  not 

less  than  50  per  cent  more  wires  than  the  wires  then  operated 
by  the  applicant; 

(4)  the  grouping  of  the  ducts; 

(5)  the  proposed  route  of  the  conduits; 

(6)  the  size  and  location  of  all  man-holes; 

(7)  the  location  of  all  sub-distribution  poles  and  boxes. 

The  board  wras  authorized  to  make  any  feasible  changes 
or  alterations  in  these  plans  which  in  its  judgment  should 
be  necessary  for  space  economy  or  for  public  convenience 
or  safety,  and  to  settle  any  differences  between  two  or  more 
applicants.  There  were  detailed  provisions  in  the  ordinance 
giving  to  the  board  of  public  works  the  control  of  the  plans 
and  the  work  of  construction.  It  was  specifically  required 
that  all  conduits  should  be  laid  in  the  same  excavation,  but 
should  terminate  in  separate  man-holes.  It  was  also  pro¬ 
vided  that  the  man-holes  should  contain  a  brick,  stone  or 
concrete  partition  separating  high  tension  wires  from  low 
tension  wires;  also  that  work  in  the  construction,  alteration 
or  repair  of  a  conduit  should  not  be  done  on  any  one  con¬ 
tinuous  line  for  a  greater  length  than  two  blocks  at  the  same 
time.  All  persons  or  companies  constructing  conduits  under 
this  ordinance  were  required,  after  the  work  was  completed, 
to  file  with  the  board  of  public  works  detailed  plans  of  the 
construction  and  the  disposition  of  all  electrical  conductors 
and  apparatus  connected  with  the  conduits,  “  so  that  a  com¬ 
plete  record  of  all  such  conduits,  with  their  appurtenances 
and  above-ground  connections,  together  with  the  electrical 

1  Laws  of  Nashville,  op.  cit.,  p.  536. 


374 


MUNICIPAL  FRANCHISES. 


conductors  and  apparatus  installed  in  connection  therewith, 
shall  at  all  times  be  on  fde  with  said  board  of  public  works.” 
This  ordinance  contained  a  provision  that  no  person  or  com¬ 
pany  owning  or  having  rights  in  any  conduit  should  sell, 
lease  or  sublease  any  property  or  right  in  connection  with 
such  conduit  without  first  obtaining  the  consent  of  the  city, 
and  also  provided  against  the  consolidation  of  companies  or 
the  use  of  conduits  otherwise  than  for  the  specific  purpose 
indicated  in  the  plans  submitted  to  the  board  of  public 
works  prior  to  construction. 

183.  A  monopoly  franchise  in  the  form  of  a  contract— 
New  York  City. — As  early  as  1884  the  legislature  of  the 
State  of  New  York  passed  a  law  requiring  all  telegraph, 
telephone  and  electric  light  wires  and  cables,  in  any  city  of 
the  state  having  a  population  of  500,000  inhabitants  or  more, 
to  be  placed  underground  before  November  1,  1885. 1  It 
was  provided  that  if  the  wires  were  not  removed  within  the 
time  specified,  the  local  governments  of  the  cities  affected 
should  without  delay  remove  all  such  wires,  cables  and  poles, 
wherever  found  above  ground,  within  their  corporate  limits. 
It  was  provided  also  that  “  no  city  in  this  state  shall  grant 
any  exclusive  privilege  or  franchise  under  this  act  to  any 
corporation  or  individual  by  which  a  monopoly  may  be 
created  or  competition  prevented  on  equal  terms  ”.  In  the 
following  year  another  act  was  passed  providing  for  the  ap¬ 
pointment  of  boards  of  electrical  subway  commissioners  in 
New  York  City  and  Brooklyn,  the  two  cities  affected  by  the 
act  of  the  preceding  year.2  It  was  made  obligatory  upon  all 
companies  that  were  required  to  place  their  wires  under¬ 
ground,  to  file  with  the  board  of  electrical  subway  commis¬ 
sioners  maps  showing  the  streets  or  avenues  which  they  de¬ 
sired  to  use  for  the  purpose  and  giving  the  general  location, 
dimensions  and  course  of  the  underground  conduits  to  be 
constructed.  Before  any  construction  was  undertaken,  how¬ 
ever,  the  approval  of  the  plan  by  the  commissioners  was  re¬ 
quired.  It  was  made  the  duty  of  the  commissioners  to  in¬ 
vestigate  any  and  all  methods  proposed  by  the  various  com¬ 
panies.  In  case  no  suitable  plan  was  proposed  or  in  use 
within  60  days  after  the  passage  of  the  act,  the  commis- 

1  Laws  of  New  York,  1884,  chapter  534. 

3  Ibid,  1885,  chapter  499. 


ELECTRICAL  CONDUITS. 


375 


sioners  were  required  to  devise  and  prepare  a  general  plan 
to  meet  the  requirements  of  the  law  and  were  given  full 
authority  to  compel  all  companies  to  use  the  subways  so  pre¬ 
pared.  The  commissioners  were  authorized,  however,  to  per¬ 
mit  the  maintenance  of  overhead  wires  in  the  suburbs  and 
in  sparsely  inhabited  portions  of  the  city  and  in  other  places 
where  underground  construction  and  operation  were  deemed 
impracticable. 

Under  the  authority  of  these  acts  the  board  of  electrical 
subway  commissioners  of  New  York  City  devised  a  general 
plan  of  electrical  subways  and  entered  into  an  exclusive  con¬ 
tract  with  the  Consolidated  Telegraph  and  Electrical  Sub¬ 
way  Company  for  the  construction  and  operation  of  such 
subways.  The  first  agreement,  entered  into  on  July  22,  1886, 
provided  that  the  company  should  furnish  the  capital  neces¬ 
sary  to  build  the  subways  (not  less  than  $3,000,000)  and 
should  build,  equip,  maintain  and  operate  them.1  The  com¬ 
pany  was  to  have  the  management  of  the  subway  and  the 
rental  of  spaces  in  it,  but  such  management  and  rental  were 
to  be  wholly  subject  to  revision,  alteration,  amendment  and 
reversal  by  the  electrical  subway  commissioners.  The  com¬ 
missioners,  however,  were  not  to  interfere  with  such  manage¬ 
ment  or  rental  except  for  the  purpose  of  more  fully  carrying 
into  effect  the  intent  of  the  contract  or  of  the  laws  of  the 
state  or  of  the  ordinances  of  the  city.  The  company  agreed 
to  keep  full  and  accurate  accounts,  showing  the  amount  of 
space  of  its  subways  occupied  and  the  names  of  the  occu¬ 
pants  ;  the  number  and  kind  of  electrical  conductors,  with  the 
names  of  their  owners;  the  gross  and  net  rentals  in  detail 
and  charges  of  all  kinds  collected  by  the  company,  with  the 
names  of  those  paying  such  rentals  or  charges;  a  detailed 
statement  of  all  expenditures  of  every  kind  made  by  the 
company,  with  the  names  of  the  persons  to  whom  payments 
were  made.  These  accounts,  together  with  all  the  books  and 
records  of  the  company,  were  to  be  open  at  all  times  to  the 
inspection  of  the  commissioners,  who  were  authorized  to 
make  full  copies  of  them. 

The  subways  were  to  be  built  in  accordance  with  the  plans 
and  specifications  furnished  by  the  commissioners  and  were 
to  be  kept  at  all  times  in  good  repair.  The  company  was  to 

1  See  copy  of  contract  on  file  with  the  Public  Service  Commission  for  the  First 
District,  New  York,  Document  F.  2277. 


376 


MUNICIPAL  FRANCHISES. 


adopt,  subject  to  the  approval  of  the  commissioners,  any  im¬ 
provements  that  would  increase  the  efficiency  of  the  subway 
system,  and  the  commissioners  reserved  the  right  at  any  time 
to  make  such  modifications  in  the  plans,  specifications,  con¬ 
struction  and  material  of  the  subways  as  experience  should 
show  to  be  desirable.  The  company  agreed  to  furnish  the 
commissioners,  at  its  own  expense,  all  maps,  plans,  drawings, 
etc.,  and  all  data  and  information  requested  by  them,  and  to 
reimburse  them  for  all  expense  incurred  in  superintending 
and  inspecting  construction.  The  spaces  in  the  subways 
were  to  be  leased  by  the  company  “  to  any  authorized  com¬ 
pany,  person  or  firm  operating  or  intending  to  operate  elec¬ 
trical  conductors  99  in  the  streets  of  the  city,  upon  applica¬ 
tion.  It  was  stipulated  that  no  space  not  actually  needed  for 
occupation  by  its  electrical  conductors  in  the  due  conduct  of 
its  business  should  be  leased  to  any  company  to  the  exclusion 
or  detriment  of  any  other  company  needing  space  in  the  sub¬ 
ways  and  able  and  willing  to  pay  for  it.  The  subway  com¬ 
pany  was  required  to  furnish  the  city  without  charge  all 
space  in  the  subways  necessary  for  the  electrical  conductors 
of  the  municipal  departments.  In  case  at  any  time  the  space 
in  the  subways  should  not  be  sufficient  for  all  companies 
applying,  the  subway  company  was  required  to  provide  the 
necessary  additional  space  hy  means  of  new  construction. 

The  rental  to  be  charged  any  company  for  the  use  of  space 
in  the  subway  was  not  to  exceed  “  the  present  cost 99  of  main¬ 
taining  its  electrical  conductors,  that  is  to  say,  the  cost  of 
maintaining  them  overhead.  But  this  provision  was  not  to 
prevent  the  making  of  any  contract  between  the  subway  com¬ 
pany  and  other  companies  on  any  terms  that  were  mutually 
satisfactory.  The  subway  company  was  authorized  to  fix  a 
fair  scale  of  rents  to  be  charged,  according  to  the  kind  of 
conductors  and  the  amount  of  space  required,  and  these  rents 
were  to  be  at  the  same  rate  to  all  occupants.  It  was  stipu¬ 
lated  that  whenever  the  net  annual  rentals  from  the  sub¬ 
ways,  after  paying  charges  and  expenses,  should  exceed  10 
per  cent  of  the  value  of  the  capital  invested  by  the  subway 
company,  the  excess  should  be  divided  into  three  equal  por¬ 
tions,  of  which  one  should  be  distributed  among  the  com¬ 
panies  occupying  the  subway,  one  should  be  paid  to  the  city, 
and  one  should  be  retained  by  the  subway  company. 


ELECTRICAL  CONDUITS. 


377 


It  was  stipulated  that  all  companies  occupying  space  in 
the  subways  should  own  their  conductors  and  should  have 
full  management  and  control  of  them,  except  where  other¬ 
wise  agreed  upon  between  them  and  the  subway  company, 
subject,  however,  to  the  approval  of  the  commissioners.  The 
subway  company,  however,  was  authorized  to  make  reason¬ 
able  rules  and  regulations  in  regard  to  the  management, 
maintenance  and  repair  of  the  electrical  conductors  occupying 
the  subways.  In  case  of  dispute  between  the  subway  com¬ 
pany  and  any  company  desiring  to  occupy  space  in  the  sub¬ 
ways,  the  commissioners  were  to  act  as  arbitrators  and  their 
decision  was  to  be  final.  The  subway  company  was  required 
to  give  a  bond  in  the  sum  of  $500,000  to  secure  the  per¬ 
formance  of  its  contract  with  the  city  and  the  construction 
of  the  subways  provided  for,  and  also  to  protect  the  city 
against  suits  arising  from  the  infringement  of  patents  or 
from  the  construction  and  maintenance  of  the  subways.  The 
expense  of  compelling ‘the  owners  of  overhead  wires  to  enter 
the  subways  was  to  be  paid  by  the  city  in  the  first  instance 
and  afterwards  to  be  collected  from  the  companies  them¬ 
selves.  The  company’s  bond  was  also  to  guarantee  the  city 
that  the  company  would  replace  pavements  and  other  prop¬ 
erty  removed  in  the  course  of  construction,  without  injury. 
In  case  at  any  time  there  should  be  a  substantial  failure  on 
the  part  of  the  subway  company  to  carry  out  the  provisions 
of  the  contract  and  it  should  be  so  adjudged  by  a  competent 
judicial  authority,  the  city  reserved  the  right  to  enter  into 
possession  and  control  of  the  subways,  and  the  company 
agreed  to  “  quietly  and  peaceably  ”  surrender  the  possession 
of  them.  The  city  granted  the  company  the  right  to  build 
the  subways  in  accordance  with  plans  furnished  from  time 
to  time  by  the  subway  commissioners  and  also  agreed  to 
use  all  lawful  means  to  compel  companies  or  persons  using 
electrical  conductors  to  comply  with  the  law  and  place  their 
conductors  in  the  subways  to  be  built  by  the  company  and 
to  pay  a  fair  rental  for  the  space  occupied. 

A  modified  contract  was  entered  into  under  date  of  April 
7,  1887. 1  Under  this  agreement  it  was  expressly  stipulated 
that  the  subway  company  should  not  make  any  contract  with 
any  electrical  company  on  terms  not  requiring  the  payment, 

1  Minutes  of  the  Board  of  Commissioners  of  Electrical  Subways,  etc.,  Vol.  I. 

p.  112. 


378 


MUNICIPAL  FRANCHISES. 


by  the  latter,  of  rents  at  the  regular  fixed  rates ;  also  that  not 
only  the  subway  commissioners  but  the  city  comptroller,  or 
any  person  deputed  by  them  or  him,  should  have  the  right  to 
examine  the  company’s  books.  It  was  also  stipulated  that 
the  company  should  file  with  the  comptroller  a  statement  on 
the  first  day  of  October  of  each  year  in  such  form  and  with 
such  verification  as  the  comptroller  might  prescribe.  The 
clause  of  the  old  contract  relating  to  the  sharing  of  net 
profits  was  changed,  so  that  all  excess  over  10  per  cent  annual 
profits  upon  the  actual  cash  capital  invested  by  the  company 
in  providing,  constructing  and  equipping  the  subways,  should 
be  paid  into  the  city  treasury.  If,  however,  the  company’s 
net  earnings  for  any  year  or  years  prior  to  the  time  of  earn¬ 
ing  such  excess  had  not  equaled  10  per  cent  per  annum,  then 
the  company  was  entitled  first  to  recoup  itself  out  of  the  ex¬ 
cess  for  the  difference  between  its  actual  earnings  and  the 
10  per  cent  standard  profit,  it  being  the  intention  that  no 
payment  should  be  made  to  the  city  out  of  excess  earnings 
until  the  company  had  first  actually  earned  and  received 
10  per  cent  for  each  year  theretofore. 

The  subway  company  was  also  required  to  secure  a  per¬ 
mit  from  the  commissioner  of  public  works  before  opening 
any  particular  street.  It  was  expressly  stated  that  the  com¬ 
pany  should  not  be  deemed  the  servant  or  agent  of  the  city 
in  doing  any  act  under  the  contract,  but  should  be  dealt 
with  by  the  city  and  by  all  other  persons  as  an  independent 
party  contracting  with  the  city  and  having  such  rights  for 
itself  as  this  contract  secured  to  it.  The  amount  of  the 
company’s  bond  was  reduced  to  $250,000. 

The  provision  for  taking  over  the  subways  in  case  of  a 
substantial  failure  on  the  part  of  the  company  to  carry  out 
the  terms  of  its  contract,  was  somewhat  modified.  In  the 
case  mentioned  the  subways  were  to  be  surrendered  by  the 
company,  “  subject  to  any  valid  mortgages  or  liens  then 
thereon  outstanding,  not  exceeding  50  per  cent  of  the  actual 
cost  of  such  subways,  and  all  leases  or  contracts  then  existing 
for  the  use  thereof  ”.  A  new  section  was  added,  providing 
that  after  January  1,  1897,  upon  the  demand  of  the  sinking 
fund  commissioners  of  the  City  of  New  York  the  company 
should  transfer  to  the  city  all  of  its  subways  and  contracts 
or  other  property  held  in  connection  with  them,  subject  to 


ELECTRICAL  CONDUITS. 


379 


leases,  mortgages  or  contracts  theretofore  lawfully  made, 
within  the  limitations  already  described,  upon  payment  by 
the  city  of  not  less  than  the  cost  of  such  subways  and  prop¬ 
erty.  In  case,  however,  the  company  had  not  earned  10  per 
cent  per  annum  on  actual  cost  during  the  term  of  its  contract, 
the  city  was  required  to  make  a  further  payment  “  in  addi¬ 
tion  to  the  cost,  not  exceeding  10  per  cent  on  such  cost,  to 
the  extent  of  such  deficiency  in  annual  earnings  ”.  This 
agreement  was  expressly  ratified  by  act  of  the  legislature 
in  1887.1 

Two  or  three  years  later  it  was  deemed  desirable  to  sepa¬ 
rate  the  control  of  the  conduits  used  for  low  tension  wires 
from  the  control  of  conduits  used  for  high  tension  wires. 
The  Empire  City  Subway  Company  (Limited)  was  incor¬ 
porated  for  the  purpose  of  taking  over  from  the  Consolidated 
Telegraph  and  Electrical  Subway  Company  all  conduits 
used  for  telephone  and  telegraph  wires  and  for  low  tension 
wires  of  the  Edison  Electric  Illuminating  Company,  and  for 
the  purpose  of  constructing  all  additional  conduits  required 
for  these  uses.  This  division  of  ownership  and  operation 
was  effected  with  the  approval  of  the  board  of  electrical  con¬ 
trol,  which  had  succeeded  to  the  authority  of  the  board  of 
electrical  subway  commissioners,  and  was  expressly  author¬ 
ized  by  act  of  the  legislature.2  The  board  of  electrical  control 
entered  into  a  separate  contract,  May  15,  1891,  with  the 
Empire  City  Subway  Company  (Limited).3  This  contract 
contained  substantially  the  same  provisions  as  the  modified 
contract  already  described. 

On  December  10,  1890,  after  hearing  a  long  argument  on 
behalf  of  the  various  companies  interested,  the  board  of  elec¬ 
trical  control  fixed  the  annual  rentals  to  be  charged  for  trunk 
line  ducts  in  the  subways  at  $900  per  mile  for  3-inch  ducts, 
$800  per  mile  for  2-J-inch  ducts,  and  $700  per  mile  for 
2-inch  ducts.4  In  1894  the  Empire  City  Subway  Company 
entered  into  two  contracts  for  maintaining  and  keeping  in 
repair  its  subways.5  One  of  these  contracts  was  with  the 
Union  Subway  Construction  Company,  which  appears  to 
have  been  a  subsidiary  of  the  Metropolitan  Telephone  and 

1  Laws  of  New  York,  1887,  Chapter  716. 

a  Ibid.,  1891.  Chapter  231. 

*  Minutes  of  Board  of  Electrical  Control,  Vol.  II.  p.  1122. 

*  Ibid.,  Vol.  I.  p.  1016. 

8  Gas  and  Electric  Light  Investigation,  New  York,  1905,  Vol.  II.  p.  1674. 


380 


MUNICIPAL  FRANCHISES. 


Telegraph  Company.  Under  the  terms  of  this  agreement 
the  construction  company  received  $100  a  year  for  each  mile 
of  single  duct  occupied  by  telephone  and  telegraph  wires. 
Under  the  other  contract  the  Edison  Electric  Illuminating 
Company  received  $200  a  year  for  maintaining  and  keeping 
in  repair  each  mile  of  single  duct  occupied  by  its  own  wires. 
The  subway  company  explained  to  the  city  commissioner  of 
accounts  that  this  disparity  in  the  allowance  for  maintenance 
of  Edison  conduits  and  telegraph  and  telephone  conduits  was 
due  to  the  greater  cost  of  construction  of  the  former,  to  the 
fact  that  they  were  more  expensive  to  keep  in  repair,  and  to 
the  further  fact  that  practically  all  of  the  Edison  ducts  were 
in  use  while  only  about  one-half  of  the  others  were  then  in 
service.  “  If  it  were  permitted  me  to  leave  the  realm  of 
fact  and  indulge  in  a  flight  of  fancy,”  commented  the  ac¬ 
countant,1  “  I  think  I  could  give  a  reason  more  in  harmony 
with  the  facts  in  the  case  than  those  recited  above.” 

The  chief  engineer  of  the  electrical  commission  of  Balti¬ 
more,  in  his  first  report  in  the  year  1900,  compared  the 
annual  rentals  charged  for  the  use  of  conduits  in  Philadelphia 
with  the  rentals  charged  in  New  York.1  The  rates  in 
Philadelphia  were  for  a  3-inch  duct,  5.7  cents  per  foot  for 
the  first  mile;  4.7  cents  per  foot  for  the  second  mile;  and 
3.8  cents  per  foot  for  the  third  mile.  In  Yew  York  the  rates 
were  28.4  cents  per  foot  for  a  3-inch  distributing  duct; 
18.9  cents  per  foot  for  a  3-inch  main  duct,  and  15.2  cents 
per  foot  for  a  2-inch  main  duct.  “  While  rental  figures  for 
Philadelphia,”  said  the  engineer,  “  show  only  an  arbitrarily 
fixed  revenue  from  duct  space,  which  would  otherwise  be 
wholly  unproductive,  those  for  New  York  illustrate  the 
opposite  extreme.”  He  explained  that  in  Philadelphia  the 
municipal  conduits  had  been  constructed  solely  for  city 
purposes,  but  that  incidentally  private  companies  having 
conduit  systems  of  their  own  occasionally  rented  additional 
space  in  the  city  conduits. 

In  its  last  report,  dated  December  31,  1897,  the  board  of 
electrical  control  summarized  the  work  done  under  its  direc¬ 
tion.  It  stated  that  the  total  construction  of  electrical  sub¬ 
ways  in  New  York  up  to  that  date  included  223  miles  of 

1  Gas  and  Electric  Light  Investigation,  1905,  op.  cit Vol.  II.  p.  1676. 

2  Report  of  the  Chief  Engineer  to  Electrical  Commission  of  Raltimore  for  the 
years  of  1898  to  1905,  p.  112. 


ELECTRICAL  CONDUITS. 


381 


ducts  for  the  Edison  low  tension  wires;  739  miles  of  ducts 
for  high  tension  electric  light  and  power  wires;  983  miles 
of  ducts  for  telephone  and  telegraph  wires,  and  58  miles  of 
ventilating  pipe.1 

“  No  provision  for  ventilation  was  made  when  the  subways  were  first 
built,”  said  this  report,2  “  and  the  necessity  for  it  could  not  be  foreseen, 
but  soon  after  frequent  explosions  occurred,  usually  at  points  where 
man-holes  were  placed,  and  they  were  found  to  be  due  to  illuminating 
gas.  The  gas,  escaping  from  leaky  and  worn-out  gas  mains,  collected 
in  the  subways  and  was  held  there  by  their  practically  air-tight  condi¬ 
tion.  A  system  of  blowers  was  provided  at  various  points,  by  which 
the  gas  was  forced  out  by  air  driven  under  pressure  through  ventilating 
pipes  placed  parallel  with  the  subways  and  having  apertures  at  the 
man-holes,  by  which  system,  the  resistance  of  air  being  greater  than 
the  pressure  of  gas,  the  entrance  of  the  latter  was  prevented. 

“This  method  gives  satisfactory  results  ;  since  its  first  introduction 
it  has  been  kept  in  constant  operation  and  is  always  under  close  inspec¬ 
tion.  The  cost  of  maintaining  this  system  of  ventilation  and  air  pres¬ 
sure  involves  a  large  expense  to  the  subway  companies,  and  we  have  on 
several  occasions  suggested  that  means  should  be  found  to  compel  the 
gas  companies  to  safeguard  their  mains  and  keep  their  product  where 
it  belongs.  It  is  wholly  wrong  to  impose  the  expense  of  rectifying  the 
results  of  their  earelessness  and  the  defects  in  their  service  upon  the 
subway  construction  companies,  which  are  themselves  without  fault  in 
the  premises.” 

These  contracts  have  been  successful  in  one  particular. 
They  have  brought  about  the  removal  of  the  overhead  wires 
from  the  streets  of  old  New  York.  As  a  matter  of  fact,  the 
Consolidated  Telegraph  and  Electrical  Subway  Company  has 
come  under  the  control  of  the  New  York  Edison  Company 
through  stock  ownership,  and  the  Empire  City  Subway  Com¬ 
pany  has  in  like  manner  fallen  under  the  control  of  the  New 
York  Telephone  Company.  Consequently,  the  two  companies 
owning  and  operating  subways  nominally  free  to  all  authorized 
owners  of  electrical  conductors,  have  themselves  become  the 
property  of  the  two  great  monopoly  companies  of  the  city 
operating  wires.  It  is  needless  to  add  that  rival  telephone  or 
electric  light  companies  are  not  admitted  to  the  subways 
unless  they  can  show  good  cause. 

In  1903  the  city’s  commissioner  of  accounts  made  an  ex¬ 
amination  of  the  hooks  of  the  two  subway  companies  for  the 
purpose  of  ascertaining  the  cost  of  construction  of  the  sub¬ 
ways  and  the  earnings  of  the  companies.  He  found  a 
financial  mess  rivaled  only  by  the  similar  mess  made  by  the 

*  Minutes,  Vol.  II.  p.  1638. 

2  Ibid.  p.  1640. 


382 


MUNICIPAL  FRANCHISES. 


notorious  ring  that  manipulated  the  Metropolitan  Street 
Railway  Company.  Instead  of  themselves  furnishing  the 
capital  for  the  construction  of  the  conduits,  the  subway  com¬ 
panies  had  secured  their  funds  through  subsidiary  companies, 
and  the  actual  cost  of  the  conduits  was  hopelessly  concealed. 
Even  from  the  records  of  the  company  as  shown  by  its  books, 
the  commissioner  of  accounts  was  able  to  reduce  the  alleged 
cost  of  the  high  tension  subways  to  approximately  $4,200,000, 
while  the  outstanding  bonds  of  the  Consolidated  Telegraph 
and  Electrical  Subway  Company  amounted  to  $5, 536,00c).1 
In  the  same  way,  the  cost  of  the  low  tension  subways  was 
reduced  to  $6,259,000,  while  the  outstanding  bonds  of  the 
Empire  City  Subway  Company  (Limited)  amounted  to 
$5,005,000.2  It  is  to  be  remembered  that  under  the  contracts 
the  city  was  authorized,  in  case  of  purchase  or  in  case  of 
default  by  the  company,  to  come  into  possession  of  the  con¬ 
duits  subject  to  mortgages  and  liens  amounting  to  not  more 
than  50  per  cent  of  the  actual  cost  of  construction.  As  a 
result  of  this  report,  the  city  brought  suit  against  both  com¬ 
panies  to  secure  an  accounting  and  the  surrender  of  the 
subways  to  the  city  on  account  of  the  alleged  violation  of  the 
companies’  contracts.  These  suits  are  still  pending.  It  is 
needless  to  add  that  under  these  conditions  the  city  has 
received  no  share  of  the  companies’  net  profits. 

184.  General  systems  of  municipal  conduits — Baltimore ; 
Erie,  Pa. ;  New  Britain,  Conn.- — By  an  act  of  the  legislature 
of  Maryland,  approved  May  30,  1892,  the  City  of  Baltimore 
was  authorized  u  to  provide  a  series  of  conduits  under  the 
streets,  lanes  and  alleys  of  said  city,  or  any  part  or  parts 
thereof,  for  the  use  of  telephone,  telegraph,  electric  light  and 
other  wires,  either  by  constructing  said  conduits  themselves 
or  by  authorizing  their  construction  by  any  person  or  corpora¬ 
tion,  upon  such  terms  as  may  be  agreed  upon,  and  to  provide 
for  the  appointment  of  an  electrical  commission  with  such 
powers  and  duties  as  the  said  Mayor  and  City  Council  may 
deem  necessary  or  appropriate  for  carrying  out  the  purposes 
of  this  act;  and  to  require  all  such  wires,  or  any  part  or  parts 
thereof,  and  the  poles  carrying  the  same,  to  be  removed  from 
the  surface  of  the  streets,  lanes  and  alleys  of  said  city,  or  any 
part  or  parts  thereof,  and  to  require  such  wires  to  be  placed 

1  Gas  .and  Electric  Light  Investigation,  op.  cit .,  Vol.  II,  pp.  1662, 1663. 

2  Ibid.,  Vol.,  II.  p.  1673. 


ELECTRICAL  CONDUITS. 


383 


in  such  conduits,  all  under  such  penalty  as  they  may  prescribe ; 
and  to  prescribe  and  establish  reasonable  rentals  to  be  paid 
by  any  company  or  person  using  any  of  said  conduits,  by 
whomsoever  the  same  may  be  constructed  ”.x  In  1896  the 
Maryland  legislature  authorized  the  city  to  issue  bonds  to 
the  amount  of  $1,000,000  to  secure  funds  for  building  these 
conduits.2  The  bond  issue  was  subject,  however,  to  the  ap¬ 
proval  of  the  electors  of  the  city.  Under  the  authority  of 
these  acts  an  electrical  commission  wTas  appointed,  plans  for 
a  municipal  conduit  system  were  prepared,  and  the  required 
issue  of  municipal  bonds  was  approved  by  the  people.  Later 
a  second  issue  of  $1,000,000  of  bonds  for  conduit  purposes 
was  authorized,  and  up  to  December  31,  1908,  the  date  of  the 
latest  available  report,  $1,616,000  had  been  expended  on  the 
construction  of  the  conduit  system,  and  7,252,000  feet  of  ducts 
had  been  laid.3  Only  about  22  per  cent  of  the  total  duct  feet 
constructed  had  been  occupied  up  to  January  1,  1906. 4  The 
city  was  confronted  with  difficulty  in  designing  its  con¬ 
duit  system  on  account  of  the  fact  that  the  two  railroad 
companies  and  the  three  electric  lighting  companies  at 
that  time  requiring  conduit  accommodations  were  supposed  to 
he  on  the  verge  of  consolidation,  and  it  was  difficult  to  arrange 
the  system  of  municipal  conduits  with  reference  to  the  needs 
of  these  prospective  tenants  without  having  more  extensive 
information  than  was  available.  The  difficulty  was  partic¬ 
ularly  marked  with  reference  to  the  electric  light  and  power 
companies.  The  principal  telephone  company  of  Baltimore 
was  already  operating  an  underground  system  under  a  special 
ordinance  granted  in  1889.  Under  the  circumstances  the 
electrical  commission  thought  it  desirable  to  plan  the  munici¬ 
pal  conduit  system  on  a  considerably  larger  scale  than 
immediate  needs  would  require.  The  commission  also  de¬ 
termined  to  construct  a  single  conduit  system  for  all  classes 
of  electrical  conductors,  as  distinguished  from  the  separate 
system  for  high  and  low  tension  wires,  which  obtains  in  Yew 
York.  Particular  attention  was  paid  to  the  ventilation  of  the 
subways  to  prevent  explosions  from  quantities  of  gas  collected 
in  man-holes,  and  to  the  prevention  of  electrolysis  resulting 
from  the  action  of  stray  electric  currents  in  the  ground. 

1  Acts  of  Assembly,  Maryland,  1892,  Chapter  200. 

*  Ibid.,  1896,  Chapter  350. 

*  Annual  Report  of  the  Comptroller  of  Baltimore  City,  1908,  p.  810. 

*  Report  of  Chief  Engineer,  etc.,  1898  to  1905,  op.  cit.,  pp.  74,  76, 


384 


MUNICIPAL  FRANCHISES. 


By  an  ordinance  approved  Dec.  10,  1900,  the  rate  of  rentals 
to  be  charged  for  the  use  of  the  municipal  conduits  was  fixed 
at  7  cents  per  annum  per  duct  foot  up  to  5,000  feet ;  6 J  cents 
per  duct  foot  from  5,001  to  25,000  feet;  6  cents  per  duct 
foot  from  25,001  to  50,000  feet;  5J  cents  per  duct  foot  from 
50,001  to  100,000  feet;  and  5  cents  per  duct  foot  for  more 
than  100,000  feet.1 

In  the  form  of  lease  which  the  city  requires  of  any  company 
using  municipal  conduits,  there  is  a  provision  that  rentals 
shall  be  paid  semi-annually  in  advance.2  It  is  also  provided 
that  the  use  of  the  conduits  shall  conform  to  the  rules  and 
regulations  of  the  electrical  commission,  and  that  the  lease 
may  be  terminated  in  part  or  in  whole  by  the  lessee  on  six 
months’  notice,  or  at  any  time  by  the  electrical  commission  if, 
in  its  judgment  after  investigation,  the  further  use  of  the 
ducts  by  the  lessee  is  such  as  to  be  detrimental  to  the  cables 
of  other  lessees  in  the  same  conduits  or  unsafe  to  other 
persons  or  property.  The  lessee  must  occupy  the  duct  space 
assigned  to  it  within  six  months  of  the  date  when  its  applica¬ 
tion  is  granted,  and  must  execute  a  bond  to  the  city  in  a  sum 
equal  to  $100  per  mile  of  duct  to  be  used  by  it.  Under  the 
rules  of  the  commission  no  limit  is  put  upon  the  voltage  of 
conductors  to  be  placed  in  the  conduits.  All  work  on  the 
conduits,  including  repairs  and  additions,  is  to  be  done  by  the 
commission.  Entrance  into  the  man-holes  or  tampering  with 
the  conduits  or  any  of  the  cables  in  them  without  a  permit 
from  the  commission,  is  to  be  prosecuted  as  trespass.  Ap¬ 
pliances  used  for  drawing  in  and  handling  cables  must  be 
approved  by  the  commission.  The  lessee  must  repair  unsatis¬ 
factory  cables  in  the  city  conduits  whenever  required  by  the 
commission  to  do  so.  All  cables  must  be  properly  tagged 
with  the  name  of  the  owner  and  the  number  of  amperes,  the 
character  of  the  current,  and  the  potential  at  which  the 
cable  is  operated.  Whenever  cables  are  installed  in  the  con¬ 
duits,  it  is  first  determined  by  actual  test  in  which  man-holes 
it  will  be  necessary  to  bond  the  cables  to  the  railway  return 
system  in  order  to  prevent  electrolytic  action,  and  such  bond¬ 
ing  is  then  done  under  the  direct  supervision  of  the  commis¬ 
sion  with  the  knowledge  and  approval  of  the  United  Bail- 

1  Report  of  Chief  Engineer,  etc.,  op.  cit.,  p.  152. 

2  Ibid,.,  p.  195. 


ELECTRICAL  CONDUITS.  385 

ways  and  Electric  Company.  The  commission  reserves  the 
right  to  amend  the  rules  and  regulations  at  any  time. 

The  City  of  Erie,  Pa.,  also  has  a  system  of  municipal  con¬ 
duits,  which  are  under  the  control  of  the  city  electrician.1 
Any  application  for  space  in  the  city’s  conduits,  after  approval, 
is  submitted  by  this  official  to  the  city  solicitor,  who  prepares 
the  necessary  bond  for  the  protection'  of  the  city.  The  city, 
as  a  part  of  its  conduit  system,  furnishes  the  terminal  poles 
and  the  necessary  distributing  poles.  The  rental  charged  for 
the  use  of  ducts  in  the  city’s  conduits  is  fixed  at  5  cents  per 
lineal  foot  per  annum  for  each  3-inch  duct.  This  rate 
applies  to  tile,  iron  or  wooden  pipe  ducts  below  or  above  the 
ground.  Applications  for  space  in  the  municipal  conduits 
must  specify  the  name  of  the  company;  the  term  for  which 
space  is  wanted;  the  number  and  location  of  ducts  required; 
the  number,  material  and  dimensions  of  conductors  to  be 
used ;  the  class  of  service  to  be  rendered ;  the  number  of  con¬ 
ductors  and  their  disposition  in  the  cable;  the  maximum 
electro-motive  force  carried  by  each  conductor;  the  style  of 
cable  proposed;  the  nature  of  the  insulating  material;  the 
thickness  of  the  insulating  material,  and  the  thickness  of  the 
lead  covering.  Applications  for  permits  to  place  wires  in 
conduits  or  to  repair  them,  must  show  a  complete  indentifica- 
tion  of  the  wires  or  cables  to  be  repaired  or  altered  and  the 
particular  man-holes  to  which  access  is  desired.  All  cables 
or  conductors  drawn  into  the  municipal  conduits  must  be 
plainly  marked  with  a  metal  tag  in  every  man-hole  with  the 
name  of  the  person  or  corporation  owning  them,  and  all 
cables  containing  conductors  carrying  a  current  of  more  than 
100  volts  must  he  marked  so  as  to  indicate  the  potential 
carried.  The  right  is  reserved  to  the  city  electrician  to 
inspect  all  wrork  in  connection  with  the  installation  or  repair 
of  wires  and  cables.  Whenever  a  man-hoie  is  opened,  before 
commencing  work  the  applicant  must  see  that  it  is  free  from 
gas  and,  if  it  is  not,  he  must  ventilate  it.  The  city  electrician 
provides  a  fan  or  blower  for  this  purpose.  Every  lessee  of 
space  in  the  municipal  conduits  is  required  to  prohibit  his 
employes  from  smoking  in  or  around  the  man-holes,  and  no 
one  under  the  influence  of  liquor  may  be  allowed  to  engage 
in  work  in  the  municipal  conduit  system.  The  entire  system, 

1  Digest  of  Laws,  Ordinances,  etc.,  Erie,  1907,  p.  104. 


386 


MUNICIPAL  FEANCHISES. 


as  constructed  up  to  January  1,  1906,  comprised  195,000  feet 
of  ducts.  Space  in  these  ducts  was  rented  by  one  telegraph 
and  two  telephone  companies.  The  ducts  were  also  used  by 
the  municipal  fire  and  police  signal  system,  but  were  not 
used  for  any  high  tension  wires.1  Only  a  little  more  than 
40  per  cent  of  the  total  duct  mileage  was  in  actual  use. 

The  City  of  New  Britain,  Conn.,  was  authorized  by  an  act 
of  the  state  legislature,  approved  June  20,  1899,  to  provide 
for  the  placing  of  all  electric  wires  underground ;  to  build  and 
maintain  “main  and  lateral  conduits,  with  man-holes  and 
ventilating  shafts,  and  all  other  appurtenances  pertaining  to 
conduits  for  telephone,  telegraph,  fire  alarm,  electric  light 
and  all  other  electric  wires  ” ;  and  to  cause  such  wires  to  be 
placed  in  the  municipal  conduits.2  The  city  was  authorized 
to  charge  reasonable  rentals  for  the  use  of  its  conduits, 
sufficient  to  provide  for  interest  on  the  cost  of  construction 
and  a  sinking  fund  to  cover  repairs  and  maintenance  and  to 
wipe  out  the  original  investment.  The  sum  charged  for  the 
use  of  the  conduits  was  to  be  apportioned  among  the  users 
according  to  the  number  of  ducts  occupied  by  them.  The 
aggregate  rentals  received  by  the  city  for  the  year  1907 
amounted  to  about  $3, 200. 3  The  superintendent  of  the 
electrical  department  reported  that  the  wires  of  the  fire  and 
police  system  in  the  underground  conduits  were  beginning  to 
give  trouble  on  account  of  electrolysis  and  would  have  to  be 
replaced  in  the  very  near  future.4  At  the  time  of  his  report 
they  had  been  in  service  seven  years. 

Under  the  original  act  authorizing  the  construction  of  the 
New  Britain  subway,  a  bond  issue  of  $50,000  was  provided 
for.  Two  years  later,  however,  in  1901,  the  act  was  amended, 
reducing  the  amount  of  bonds  that  might  be  issued  to 
$36,000,  the  amount  then  outstanding,  and  the  city  was 
prohibited  from  building  any  more  conduits  without  further 
authority  from  the  general  assembly.  In  1907,  however,  the 
authorized  bond  issue  was  increased  to  $100,000  to  enable 
the  city  to  make  certain  specific  extensions  of  its  conduit 
system.5 

185.  Conduit  franchises  incidental  to  other  public  utility 
services— Chicago  ;  Troy;  Rochester;  Buffalo. —  As  early  as  1882 

1  Digest  of  Laws,  etc.,  op.  cit..  p.  118. 

*  Charter  of  the  City  of  New  Britain,  p.  117. 

8  Municipal  Record,  New  Britain,  1907,  p.  41.  4  Ibid.,  p.166.  8  Ibid.,  p.  860. 


ELECTRICAL  CONDUITS. 


387 


a  franchise  was  granted  by  the  City  of  Chicago  to  the  Chicago 
Sectional  Electric  Underground  Company  to  build  conduits 
for  commercial  purposes.1  This  company  built  about  seven 
miles  of  conduits  in  the  business  district  and  in  1890  was  rent¬ 
ing  space  in  them  at  the  rate  of  $1,000  per  duct-mile  per  year. 
One  duct,  however,  was  reserved  for  the  use  of  the  city  with¬ 
out  cost.  This  franchise  expired  in  1907;  and  in  the 
ordinance  passed  in  March,  1908,  governing  the  rates  to  be 
charged  by  the  Commonwealth-Edison  Company,  the  City 
of  Chicago  provided  that  if  the  Edison  Company  should 
acquire  the  conduits  constructed  under  this  old  franchise,  it 
would  be  permitted  to  continue  to  operate  them  under  exist¬ 
ing  leases,  on  condition  that  it  should  pay  the  city  an  amount 
equal  to  10  per  cent  of  the  gross  rentals  received  from  the 
operation  of  such  conduits.2  Most  of  the  conduits  in  use  in 
Chicago  are  owned  and  operated  by  the  city  for  municipal 
purposes  and  by  the  various  individual  companies  having 
electrical  conductors  in  the  streets. 

In  a  franchise  granted  by  the  City  of  Troy,  June  6,  1901, 
to  the  Troy  Telephone  and  Telegraph  Company,  permission 
was  given  the  company  to  construct  conduits  for  its  own  use.3 
The  company  was  authorized,  however,  to  provide  space  in  its 
conduits  for  carrying  the  wires  and  cables  of  other  companies 
duly  authorized  to  carry  on  business  in  the  city,  upon  such 
terms  as  might  be  agreed  upon  between  the  companies 
interested. 

In  the  City  of  Rochester,  likewise,  the  Rochester  Railway 
and  Light  Company  owns  conduits  not  only  for  its  own  use 
but  also  for  the  use  of  the  Rochester  Telephone  Company.4 
The  77  miles  of  conduits  in  the  city  January  1,  1906,  were 
owned  by  the  Rochester  Railway  and  Light  Company,  the 
Bell  Telephone  Company  and  the  Western  Union  Telegraph 
Company. 

In  Buffalo,  when  overhead  wires  were  ordered  removed,  any 
company  granted  permission  to  place  its  wires  in  underground 
conduits  was  required  to  construct  conduits  of  sufficient 
capacity  to  accommodate  its  own  wires  and  any  other 
electrical  wires  on  the  same  street,  and  also  to  provide  for  an 

1  Report  of  Electrical  Commission  of  Baltimore  City,  op.  cit.,  p.  158. 

1  Ante,  section  130. 

8  Municipal  Ordinances  of  the  City  of  Troy,  1905,  p.  178. 

*  Annual  Reports,  1905,  Department  of  Public  Works,  Rochester,  pp.  123,  135. 


388 


MUNICIPAL  FRANCHISES. 


increase  to  the  extent  of  at  least  50  per  cent.1  The  wires 
of  the  city  were  to  be  carried  in  the  conduits  free  of  charge, 
and  the  several  companies  operating  in  the  same  streets  were 
authorized  to  use  the  conduits  constructed  by  one  of  their 
number  upon  such  terms  as  could  be  agreed  upon  or,  in  case 
of  disagreement,  upon  terms  fixed  by  arbitration. 

188.  Independent  conduit  franchises  not  exclusive— 
Syracuse ;  Kansas  City;  Minneapolis ;  Duluth. — On  September 
15,  1896,  the  City  of  Syracuse  granted  a  franchise  for  the 
construction,  maintenance  and  operation  of  underground 
electrical  subways  or  conduits  to  Eugene  Hughes  &  Company.2 
All  construction  work  was  to  be  done  in  accordance  with  plans 
and  specifications  approved  by  the  common  council  and  in  a 
manner  satisfactory  to  the  commissioner  of  public  works. 
Not  more  than  two  blocks  in  any  one  street  were  to  be  dis¬ 
turbed  at  one  time.  The  pavement  was  to  be  restored  to  as 
good  condition  as  it  was  in  formerly,  but  no  asphalt,  brick 
or  sandstone  pavement  or  gutter  could  be  torn  up  without 
special  permission  of  the  city  authorities.  Authority  was 
reserved  to  the  commissioner  of  public  works  to  appoint  neces¬ 
sary  inspectors  to  superintend  all  street  work,  the  expense 
of  such  inspectors  to  be  paid  by  the  grantees.  The  conduits 
built  by  the  grantees  wrere  to  be  “  suitable  and  sufficient,” 
and  in  their  construction  and  repair  no  sewer,  water  or  gas 
pipe,  telegraph,  telephone,  fire  alarm  telegraph,  police  signal, 
or  electric  light  wires,  cables,  pipes,  subways  or  conduits,  or 
other  structures  or  appliances,  were  to  be  permanently  dis¬ 
turbed  or  interfered  with.  The  grantees  were  required  to 
adopt  all  necessary  means  to  increase  the  usefulness  and 
efficiency  of  their  proposed  system  of  subways.  Changes  in 
the  construction  or  location  of  the  subways  deemed  reasonable 
and  necessary  by  the  common  council,  were  to  be  made  by  the 
grantees  at  their  own  expense.  Complete  maps,  plans  and 
specifications  of  the  system  of  subways  and  conduits  to  be 
constructed  were  to  be  filed  by  the  grantees  before  any  streets 
were  dug  into  or  disturbed.  Such  maps  and  plans  were  to 
show  the  exact  location,  depth  and  alignment  of  the  proposed 
subways,  the  number  of  ducts  and  the  details  of  construction, 
and  were  subject  to  the  approval  of  the  common  council. 

1  See  Report  of  Electrical  Commission  of  Baltimore,  op.  cit p.  168  and  ante 
section  181. 

*  Transcript  of  Ordinance  furnished  by  Dr.  Chas.  W.  Tooke. 


ELECTRICAL  CONDUITS. 


389 


The  grantees  agreed  to  furnish  the  several  departments  of  the 
city  with  necessary  ducts  for  the  use  of  the  municipal  wires 
of  the  fire  alarm  telegraph,  police  call  or  signal  system,  or 
city  wires  for  “  other  purposes  that  may  now  or  shall  here¬ 
after  be  required.”  If  at  any  time  the  conduits  constructed 
by  the  grantees  proved  to  be  insufficient  for  the  use  of  the 
city  and  the  individuals  and  corporations  applying  for  them, 
the  grantees  were  required  to  construct  additional  conduits 
or  additional  ducts  in  conduits  already  constructed.  The 
franchise  was  taken  by  the  grantees  subject  to  all  ordinances 
and  regulations  already  enacted  or  to  be  enacted  thereafter 
by  the  common  council.  It  was  expressly  stipulated  that  the 
grant  should  not  be  construed  as  an  exclusive  right  or 
privilege,  or  so  as  to  prevent  the  granting  of  similar  privileges 
to  other  individuals  or  companies. 

Several  other  franchises,  for  electric  light  and  power  and 
telephone  and  telegraph  purposes,  granted  by  the  City  of 
Syracuse  from  time  to  time,  carried  with  them  the  right  to 
construct  conduits  for  the  individual  use  of  the  several 
grantees  upon  terms  otherwise  generally  similar  to  the  terms 
of  the  Hughes  franchise. 

A  franchise  was  granted  April  16,  1900,  by  the  City  of 
Kansas  City  to  the  Kansas  City  Electrical  Wire  Subway  Com¬ 
pany,  for  the  purpose  of  laying  conduits  under  the  streets 
and  renting  space  therein.1  This  franchise  was  for  the 
period  of  30  years.  It  contained  many  of  the  usual  provi¬ 
sions  for  the  supervision  of  plans  and  construction  work  by 
the  municipal  authorities.  It  also  required  the  company  to 
deposit  with  the  city  $1,000  as  a  special  fund  to  be  used  by 
the  board  of  public  works  in  making  the  necessary  repairs 
and  changes  for  which  the  company  was  liable.  Whenever 
the  board  notified  the  company  to  make  any  repairs  required 
under  the  ordinance,  if  the  company  neglected  or  refused  to 
make  them,  the  expense  of  the  work  was  to  be  taken  out  of 
this  fund  and  the  company  was  required,  upon  10  days’  notice, 
to  deposit  with  the  city  comptroller  enough  money  to  restore 
the  fund  to  the  full  amount  of  $1,000.  Upon  failing  to  do 
so,  the  president,  manager  or  superintendent  to  whom  notice 
had  been  sent  would  be  deemed  guilty  of  a  misdemeanor  and 
subject  to  a  fine  of  from  $50  to  $100  for  each  offense.  In  case 

1  Franchise  Ordinances  for  Public  Utilities,  op.  cit.,  p.  76. 


390 


MUNICIPAL  FRANCHISES. 


the  company,  its  successors  or  assigns,  should  fail  or  refuse 
to  comply  with  any  of  the  substantial  provisions  of  the 
ordinance  for  a  period  of  30  days  after  notice,  then  all  rights 
and  privileges  under  the  ordinance  would  ipso  facto  cease. 
It  was  specifically  provided  that  the  company  “  shall  be  a 
common  carrier  and  shall  permit  any  person  or  persons,  com¬ 
pany  or  companies,  to  use  said  system  of  underground  con¬ 
duits  upon  such  terms  as  may  be  agreed  upon  by  the  respec¬ 
tive  parties,  and  in  case  they  cannot  agree,  such  terms  may  be 
fixed  by  arbitration/’  The  company  was  required  to  pay  the 
city,  in  addition  to  all  other  taxes  assessed  by  law,  a  sum  equal 
to  two  per  cent  of  its  gross  receipts,  and  its  books  were  to  be 
subject  to  inspection  by  the  city  comptroller  or  by  any  com¬ 
mittee  appointed  by  the  common  council  for  the  purpose.  At 
the  expiration  of  20  years  the  city  was  to  have  the  right  to 
acquire  the  company’s  plant  upon  paying  its  “  actual  value.” 
In  case  the  parties  could  not  agree,  this  value  was  to  be  ascer¬ 
tained  by  one  of  the  judges  of  the  state  circuit  court  then 
having  jurisdiction  over  the  trial  of  causes  in  the  city.  If 
the  city  desired  to  purchase,  it  was  required  to  pass  an 
ordinance  declaring  its  intention  to  do  so.  Thereupon  it  was 
to  file  a  petition  with  the  court,  asking  that  one  of  the  judges, 
to  be  named  in  the  petition,  should  proceed  to  value  the  plant. 
Notice  of  the  filing  of  the  petition  was  to  be  given  to  the 
owner  of  the  plant  at  least  15  days  in  advance.  It  was 
stipulated  that  in  estimating  the  value  of  the  plant  the  judge 
“  shall  have  regard  alone  to  the  actual  value  in  money,  at 
the  time  of  making  said  estimate,  of  the  conduits,  machinery, 
engines,  instruments,  appliances,  fixtures,  lots  of  ground, 
buildings,  and  all  other  property  of  every  kind,  owned  or 
controlled  and  used  by  said  grantee  and  necessary  to  the 
maintenance  and  operation  of  the  system  as  then  in  use  ” 
in  the  city.  It  was  provided,  however,  that  “  the  value  of 
the  unexpired  franchise  and  the  value  of  the  stock  and  the 
earning  capacity  of  said  plant,  shall  not  be  considered  in  said 
valuation  ”. 

On  October  10,  1887,  a  franchise  was  granted  by  the  City 
of  Minneapolis  to  the  National  Subway  Company,  authoriz¬ 
ing  it  to  “  construct,  maintain,  repair  and  operate  conduits 
or  subways,  pipes,  mains,  conductors,  man-holes  and  service 
pipes  in  the  streets,  avenues  and  alleys  throughout  said  city, 


ELECTRICAL  CONDUITS. 


391 


for  and  during  the  term  of  thirty  consecutive  years  from  the 
date  of  the  passage  of  this  ordinance,  for  the  purpose  of  dis¬ 
tributing  and  maintaining  a  line  or  lines  of  electrical  and 
other  wires,  together  with  all  necessary  feeders  and  service 
wires  or  other  electrical  conductors  to  he  used  for  the  transmis¬ 
sion  of  electricity  for  any  and  all  purposes  ”.1  The  grantee 
was  required  to  permit  other  companies  to  use  its  conduits 
upon  such  terms  as  could  be  agreed  upon  or,  in  case  of  dis¬ 
agreement,  upon  such  terms  as  should  be  determined  by 
arbitration.  The  usual  provision  was  made  requiring  the 
grantee  to  furnish  the  city  space  in  its  conduits,  free  of 
charge,  sufficient  for  carrying  the  city’s  fire  and  police  alarm 
and  telephone  wires  and  “  all  other  wires  used  for  automatic¬ 
ally  or  telegraphically  receiving  or  transmitting  fire,  burglar 
or  police  alarm  Under  this  franchise  the  company  was 
required  to  have  two  continuous  miles  of  conduit  ready  for 
use  by  December  1,  1888,  and  thereafter  to  extend  its  system 
at  least  one  mile  a  year  until  all  the  territory  within  the  fire 
limits  of  the  city,  as  existing  at  that  time  or  as  they  might 
thereafter  be  extended,  was  fully  provided  with  conduits  and 
other  conveniences  for  underground  wiring.  The  franchise 
was  declared  not  to  be  exclusive,  and  the  company  was  not 
permitted  to  use  more  than  one-fourth  of  the  space  in  the 
streets  at  that  time  set  apart  by  ordinance  for  underground 
wiring.  If  at  any  time  the  company’s  subway  proved 
unsatisfactory  and  “  an  encumbrance  and  a  nuisance  in  the 
streets  ”,  the  city  reserved  the  right  to  require  the  company 
to  remove  it  at  its  own  expense. 

By  an  ordinance  passed  April  25,  1892,  amended  the  follow¬ 
ing  year,  a  franchise  was  granted  by  the  City  of  Duluth  to 
the  Northern  Electric  Subway  Company,  to  construct  and 
operate  conduits  throughout  the  city  for  a  period  of  30  years.2 
These  conduits  could  be  used  by  the  grantee  or  rented  to 
others  to  be  used  for  the  transmission  of  electricity  for  any 
and  all  purposes.  The  company  was  not  authorized,  without 
special  permission  of  the  common  council,  to  lay  more  than 
one  subway  in  any  street.  On  east  and  west  streets  suclr 
subway  was  to  be  on  the  southerly  side  of  the  street,  and  on« 
north  and  south  streets  on  the  easterly  side  of  the  street.. 
The  company  was  authorized  to  charge  for  the  use  of  its; 

1  Charter,  Ordinances,  etc.,  op.  cit .,  p.  592.  1  Franchises,  Duluth,  p.  383., 


392 


MUNICIPAL  FRANCHISES. 


conduits  $1,000  per  mile  per  year  for  each  2J-inch  duct, 
$1,200  per  mile  per  year  for  each  3-inch  duct,  and  for  larger 
ducts  at  proportionate  rates.  The  company  was  required  to 
commence  construction  within  three  months  after  being 
directed  to  do  so  by  the  common  council  and,  within  six 
months  after  the  date  of  commencement,  to  complete  the 
construction  of  one  mile  of  subways,  ready  for  the  conveyance 
of  all  the  electric  wires  of  persons  or  corporations  desiring 
to  use  the  subway.  Thereafter  the  company  was  to  construct 
its  subways  as  directed  by  the  common  council,  “  provided 
that  it  shall  satisfactorily  appear  that  the  public  requirements 
and  prospects  of  immediate  rental  warrant  said  company  in 
building  such  line  or  lines  of  subways  ”.  The  company  was 
to  provide  free  space  for  the  city’^s  telegraph,  police  telephone 
and  fire  alarm  wires.  The  city  reserved  the  right  to  purchase 
the  plant,  at  the  end  of  10  years  or  at  the  end  of  any  5-year 
period  thereafter,  at  a  price  to  be  agreed  upon  with  the  com¬ 
pany  or,  in  the  event  of  disagreement,  to  be  determined  by 
arbitrators.  The  city  was  required  to  give  6  months’  notice 
of  its  desire  to  purchase  and  to  pay  the  amount  of  the  award 
within  6  months  after  it  had  been  made.  The  value  of  the 
franchise,  however,  was  not  to  be  considered  in  fixing  the 
purchase  price. 

187.  Electrical  conduits  in  the  City  of  Washington — 

Under  authority  of  an  act  of  Congress  approved  August  6, 
1890,  President  Harrison  appointed  a  special  commission  to 
consider  the  location,  arrangement  and  operation  of  electric 
wires  in  the  District  of  Columbia,  with  a  view  to  securing 
the  construction  of  a  safe  and  convenient  system  of  conduits 
and  subways  for  their  accommodation.  This  commission,  of 
which  Professor  Henry  A.  Rowland,  of  Johns  Hopkins 
University,  was  a  member,  reached  the  conclusion  that  over¬ 
head  wires  were  objectionable;  that  underground  wires  were 
practicable  for  all  kinds  of  electrical  service;  that  efficient 
cables  for  all  kinds  of  electrical  service  could  be  manufactured 
at  reasonable  cost;  that  conductors  carrying  high  potential 
currents  could  be  placed  close  to  telephone  or  telegraph  wires 
without  interference  by  induction;  that  with  proper  protec¬ 
tion  currents  of  the  highest  potentials  could  be  safely  used ; 
that  efficient  management  of  electrical  matters  required  a 
permanent  municipal  bureau  or  department ;  that  where 


ELECTRICAL  CONDUITS. 


393 


electric  wires  alone  were  to  be  accommodated  in  the  subways, 
conduits  on  either  side  of  the  street,  constructed  on  the 
“  drawing- in  ”  plan,  were  preferable  to  a  single  subway  in 
the  center  of  the  street;  and,  finally,  that  the  interests  of  the 
city  would  be  best  subserved  by  public  ownership,  while  the 
method  of  having  conduits  built  by  a  subway  company  and 
renting  them  to  electric  companies  would  result  in  great 
trouble  and  inconvenience  to  all  concerned.1  These  recom¬ 
mendations  were  not  adopted  by  Congress. 

On  February  8,  1896,  Mr.  John  W.  Ross,  President  of  the 
Board  of  Commissioners  of  the  District  of  Columbia,  sub¬ 
mitted  to  the  chairman  of  the  House  committee  on  the  affairs 
of  the  District  a  special  report  on  a  bill  that  had  been 
introduced  into  the  House  for  the  purpose  of  incorporating  a 
new  telephone  company  and  giving  it  a  franchise  in  the  City 
of  Washington.  Mr.  Ross  stated  that  it  had  been  the  uniform 
policy  of  the  commissioners,  in  reporting  upon  similar  bills, 
to  take  ground  adverse  to  the  granting  of  privileges  of  this 
kind  to  new  companies.2  He  said  that  the  business  carried 
on  by  such  companies  “was  under  such  conditions  as  to  make  a 
monopoly  desirable  if  not  necessary  ”,  and  that  “  aside  from 
the  great  damage  to  the  pavements  and  inconvenience  to  the 
public  occasioned  by  digging  up  miles  of  public  streets,  it  is 
not  necessary  or  wise  to  duplicate  any  gas  pipes  or  conduits 
in  the  public  streets,  for  Congress  has  full  power  to  regulate 
the  rates  to  be  charged  by  such  companies,  as  well  as  to 
correct  any  other  evils  ”.  He  stated  that  none  of  the  tele¬ 
phone  and  electric  light  companies  had  as  yet  extended  their 
conduits  beyond  a  small  number  of  the  more  important 
streets,  and  that  such  conduits  should  always  be  laid  on  both 
sides  of  the  streets  in  order  to  avoid  cutting  the  pavement 
for  the  purpose  of  making  house  connections.  He  stated, 
moreover,  that  all  electric  wires,  including '  telegraph  wires, 
should  be  laid  in  the  same  conduits.  Referring  to  the  value 
of  public  franchises,  he  said : 3 

“It  may  not  be  desirable  or  practicable  at  present  for  the  District  to 
establish  a  gas  plant,  or  an  electric  light  plant,  for  the  manufacture  and 
sale  of  gas  and  electricity,  but  it  can  and  ought  to  own  every  conduit 
and  subway  in  the  public  streets.  It  is  the  exclusive  privileges  incident 

1  See  Report  of  Electrical  Commission,  House  of  Representatives,  Executive 
Document  No.  15,  Fifty-Second  Congress,  First  Session,  p.  19. 

*  Report  of  Electrical  Commission,  Baltimore,  op.  cit .,  p.  141. 

*  Ibid.,  p.  146. 


394 


MUNICIPAL  FRANCHISES. 


to  such  ownership  that  create  a  monopoly  in  these  companies,  and  give 
to  them  large  revenues  which  of  right  belong  to  the  public.  Such 
franchises  should  never  be  granted  to  corporations,  except  for  a  limited 
period,  to  the  highest  bidder,  under  proper  restrictions,  and  always 
with  some  provision  for  ultimate  ownership  by  the  District,  similar  to 
that  which  has  resulted  in  so  much  profit  to  Paris  and  other  cities. 

“In  view  of  the  demands  upon  the  current  revenues  for  pressing 
public  needs,  which  are  likely  to  continue  with  the  growth  of  the  city, 
it  may  not  be  deemed  wise  by  Congress  to  enter  at  this  time  upon  any 
extended  plan  of  acquiring  existing  conduits  by  the  District  or  of  lay¬ 
ing  new  conduits  of  sufficient  capacity  to  contain  all  the  telephone, 
telegraph  and  electric  light  and  power  wires,  which  the  commissioners 
believe  would  afford  the  only  complete  and  permanent  cure  for  existing 
evils  growing  out  of  the  occupancy  of  the  public  streets  by  corporations 
using  overhead  wires,  and  which  pay  nothing  for  such  privilege. 

“  There  should  be  no  permanent  partnership  with  corporations  in  the 
use  of  the  public  streets  for  the  purposes  mentioned,  and  provision 
should  be  made  to  terminate  all  such  rights  that  have  been  acquired  as 
early  as  practicable.  When  the  District  owns  the  conduits  it  will  be  in 
receipt  of  all  the  revenues  to  be  derived  from  the  use  of  the  subways, 
and  will  then  be  able  to  permit  all  companies  to  compete  for  the  priv¬ 
ilege  of  laying  wires  therein  for  public  and  private" lighting,  as  well  as 
for  telephone  service,  without  injury  to  the  streets  or  inconvenience  to 
the  public.  Until  this  plan  can  be  carried  out  the  commissioners  recom¬ 
mend  that  they  be  authorized  to  advertise  for  proposals,  and  to  rent  to 
the  highest  responsible  bidder  the  exclusive  privilege  of  laying  and 
maintaining  conduits  in  the  public  streets  and  alleys  of  the  District  for 
a  period  of  thirty  years  ;  the  conduits  to  be  constructed  in  accordance 
with  plans  to  be  approved  by  the  commissioners,  and  under  their  super¬ 
vision,  reserving  a  sufficient  number  of  ducts  for  the  use  of  all  public 
wires,  and  providing  that  the  conduits  shall  belong  to  the  District  at 
the  expiration  of  said  period.” 

Along  with  his  report,  Mr.  Ross  submitted  a  bill  approved 
by  the  commissioners,  which,  if  enacted  into  law,  would  have 
given  them  the  right  to  grant  to  the  highest  responsible  bidder, 
after  advertisement  for  proposals,  the  exclusive  right  to  lay 
and  maintain  electrical  subways  in  the  District  of  Columbia 
for  a  period  of  30  years.  These  subways  were  to  be  con¬ 
structed  under  the  supervision  of  the  commissioners,  and  to  be 
of  sufficient  capacity  in  their  judgment  to  contain  all  wires 
and  cables  then  in  the  streets  or  that  might  be  necessary 
thereafter,  except  those  laid  near  the  middle  of  the  streets  for 
street  railway  purposes.  The  franchise  to  be  granted  under 
the  act  was  to  carry  with  it  the  right  to  use  the  subways  and 
to  sublet  them  at  fair  and  reasonable  rates,  and  any  company 
would  have  the  right  to  rent  any  unoccupied  duct  for  its 
necessary  uses  at  a  fair  and  reasonable  rental  or  on  such 
terms  as  might  be  agreed  upon  by  the  parties  in  interest,  or, 


ELECTRICAL  CONDUITS. 


395 


in  case  of  disagreement,  on  such  terms  as  should  be  determined 
by  the  Supreme  Court  of  the  District.  There  was  to  be 
reserved,  in  all  conduits  constructed  under  the  authority  of  the 
act,  the  free  use  of  a  sufficient  number  of  chambers  to  con¬ 
tain  all  public  wires  or  cables.  The  commissioners  were  to 
require  a  bond  of  $50,000  from  the  successful  bidder  for  the 
franchise.  Under  the  proposed  act  it  would  be  necessary  for 
the  grantee  of  the  franchise  or  contract  to  construct  subways 
in  any  paved  streets  whenever  the  commissioners  deemed  it 
necessary  for  the  public  interest,  and  in  all  other  streets  in 
advance  of  paving.  At  the  expiration  of  the  franchise  period 
all  the  subways  constructed  under  the  authority  of  the  act 
would  be  the  property  of  the  District.  Furthermore,  in  case 
the  franchise-holder  should  neglect  to  comply  with  the  terms 
of  his  contract  for  a  period  of  six  months,  all  the  subways, 
and  man-holes  would  become  the  property  of  the  District 
and  the  franchise  would  come  to  an  end.  It  was  provided  that 
after  the  passage  of  the  act  it  should  be  unlawful  to  lay  any 
conduit  or  subway  in  any  street  of  the  District  except  under 
the  authority  of  the  act,  and  that  as  soon  as  a  subway  was 
built  by  the  grantee  of  a  franchise  under  this  act,  all  wires 
on  or  over  the  street  in  which  the  subway  was  situated  should 
be  placed  underground  within  30  days  after  the  construction 
was  completed.  The  successful  bidder  was  to  pay  the  amount 
of  his  bid  in  equal  annual  instalments. 

The  bill  just  described  never  became  a  law.  From  time 
to  time  Congress  authorized  different  companies  operating 
electrical  conductors  in  the  District  to  build  underground 
conduits  for  their  accommodation.  By  an  act  passed  May  26, 
1900,  the  commissioners  were  authorized  to  grant  permission 
to  lay  conduits  for  the  transmission  of  electricity  and  pipes 
for  the  transmission  of  steam  in  the  alleys  of  the  District.1 
By  another  act,  approved  June  6,  1900,  the  commissioners 
were  authorized  to  grant  permits  for  the  repair,  enlargement 
and  extension  of  existing  electric  lighting  conduits ;  and  in 
every  conduit  to  be  constructed  under  such  permission  three 
ducts  were  to  be  reserved  for  the  use  of  the  United  States 
and  the  District  of  Columbia.2  As  a  condition  of  this  grant, 
electric  lighting  rates  were  not  to  exceed  a  certain  maximum 

1  Laws  Relating  to  Gas,  Electric  Light,  etc..  Companies,  op.  cit .,  p.  41. 

2  Ibid .,  p.  42. 


396 


MUNICIPAL  FRANCHISES. 


prescribed  in  the  act.  By  another  act,  approved  June  20, 
1902,  it  was  provided  that  all  telephone  wires  within  a  certain 
portion  of  the  District  should  be  placed  underground  and 
any  company  maintaining  a  telephone  plant  was  authorized 
and  required  to  submit  to  the  commissioners  a  plan  for  the 
construction  of  underground  conduits  to  receive  its  wires.1 
As  soon  as  such  plan  was  approved  and  a  permit  granted,  the 
company  was  bound  to  proceed  diligently  to  construct  and 
put  into  operation  the  required  conduits.  In  each  conduit  the 
District  was  authorized  to  use  not  to  exceed  three  ducts  for 
carrying  its  low  potential  wires,  free  of  charge.  This  act 
was  passed  for  the  benefit  of  the  Chesapeake  and  Potomac 
Telephone  Company. 

It  appears  from  the  report  of  the  engineer  department  of 
the  District  of  Columbia  that  on  June  30,  1908,  underground 
conduits  in  the  District  were  owned  by  one  telephone  company, 
two  electric  light  and  power  companies,  two  telegraph  com¬ 
panies,  six  railway  companies,  the  United  States  govern¬ 
ment,  the  District  of  Columbia,  and  private  parties.2  The 
total  amount  of  construction  at  that  time  was  1,160,000  feet 
of  conduits  and  5,972,000  feet  of  ducts.  These  figures,  how¬ 
ever,  appear  not  to  include  the  conduits  owned  by  the  District 
of  Columbia,  of  which  there  were  in  use,  for  District  cables, 
98,726  feet. 

1  Laws  Relating  to  Gas,  Electric  Light,  etc.,  Companies,  op.  cit.f  p.  43. 

*  Report  of  the  Commissioners  of  the  District  of  Columbia,  1908,  Vol.  II, 
Engineer  Department,  p.  103 ;  also  Vol.  I.,  p.  195. 


CHAPTER  XIII. 

WATER  WORKS  AND  WATER  SUPPLY  FRANCHISES. 


188.  Municipal  vs.  private  ownership  of 

water  franchises. 

189.  Uses  of  water  derived  from  public 

supplies. 

190.  Franchise  features  peculiar  to 

water  works. 

191.  Characteristics  of  a  model  water 

franchise. 

192.  A  water  franchise  in  a  small  uni¬ 

versity  town. — Ann  Arbor. 

193.  A  city  dominated  by  a  water  com¬ 

pany.— New  Haven. 

194.  A  city  having  adequate  powers,  of 

control.— Indianapolis. 

196.  The  city’s  franchise  from  the 


Federal  Government.— San  Francisco. 

196.  A  project  too  vast  for  private  enter¬ 

prise.— Los  Angeles. 

197.  A  franchise  forfeited  for  abuse  of 

privileges.— New  Orleans. 

198.  Cut  throat  competition  followed  by 

monopoly. — Denver. 

199.  Water  franchises  granted  to  mining 

companies.— Butte,  Mont. 

200.  Exemption  from  taxation  ;  rates : 

quality  of  water,  etc. — Birming¬ 
ham,  Ala. 

201.  Regulation  of  rates. — Knoxville. 

202.  Hot  water  from  natural  springs.— 

Salt  Lake  City  ;  Boise. 


188.  Municipal  vs.  private  ownership  of  water  franchises _ 

In  the  Manual  of  American  Water  Works,  issue  of  1891,  it 
was  stated  that  57  per  cent  of  the  water  works  plants  of  the 
United  States  were  owned  by  private  companies,  although 
the  amount  of  capital  invested  in  municipal  plants  was  much 
greater  than  that  invested  in  private  plants.1  This  dispro¬ 
portion  was  explained  by  the  fact  that  the  majority  of  the 
plants  in  the  larger  cities  were  owned  and  operated  by  the 
municipality.  The  Municipal  Year  Book  published  in  1902 
showed  that  out  of  1475  urban  centers  having  a  population 
of  more  than  3,000  each,  which  had  water  works,  there  was 
municipal  ownership  in  776;  private  ownership  in  661;  both 
public  and  private  ownership  in  33;  joint  ownership  in  14; 
while  in  one  the  ownership  was  not  reported.2  Of  the  135 
cities  with  a  population  of  more  than  30,000  each,  88  had 
public  ownership;  36  had  private  ownership;  7  had  both 
public  and  private  ownership;  and  4  had  joint  ownership. 
We  have  no  accurate  statistics  of  the  ownership  of  water 

1  See  Engineering  News,  for  Jan.  9, 1892,  Vol.  27,  p.  37,  for  summary  of  franchise 
requirements,  taken  from  “  Manual  of  American  Water  Works  ”  for  1891. 

*  Municipal  Year  Book,  p.  xxix. 

397 


398 


MUNICIPAL  FRANCHISES. 


works  in  the  United  States  at  the  present  time.  It  is  well 
known,  however,  that  the  movement  toward  municipal  owner¬ 
ship  has  been  going  on  steadily  and  that  the  number  of  im¬ 
portant  cities  in  which  the  water  works  are  owned  by  private 
companies  decreases  from  year  to  year.  The  special  report 
of  the  United  States  Census  Bureau,  giving  statistics  of 
cities  with  a  population  of  over  30,000  in  1905,  showed  that 
the  water  works  in  110  out  of  a  total  of  154  were  owned  by 
the  municipality.  Of  the  38  cities  having  more  than  100,000 
population,  there  were  only  9  in  which  the  water  works  were 
owned  by  private  companies.  Of  these  nine.  New  Orleans 
has  already  established  a  municipal  system;  Omaha  is  in 
the  throes  of  litigation  for  the  purchase  of  its  water  works; 
San  Francisco  has  voted  by  a  great  popular  majority  to  es¬ 
tablish  a  municipal  system  bringing  water  from  Yosemite 
Park;  and  Denver  has  just  had  an  appraisal  of  the  private 
plant,  looking  toward  purchase.  This  leaves  Indianapolis, 
New  Haven,  Scranton,  St.  Joseph,  Mo.,  and  Paterson,  which, 
so  far  as  the  writer  knows,  still  maintain  the  policy  of  private 
ownership. 

The  question  of  municipal  as  against  private  ownership  of 
water  works,  has  a  somewhat  different  status  from  that 
relative  to  the  ownership  of  most  other  public  utilities.  Even 
the  opponents  of  general  municipal  ownership  of  public  util¬ 
ities  are  usually  free  to  admit  that  a  city  should  own  the 
water  works  and  operate  them  for  the  benefit  of  the  public. 
This  admission  is  due  partly  to  the  nature  of  the  utility  and 
partly  to  the  fact  that  the  policy  of  municipal  ownership  of 
water  works  has  become  well  established  in  this  country. 
Wherever  the  water  works  remain  in  private  hands,  however, 
the  holders  of  the  franchises  cling  to  them  with  the  utmost 
tenacity.  Indeed,  private  water  works  afford  an  unexcelled 
field  for  the  exploitation  of  the  people  at  the  hands  of  those 
who  hold  special  privileges.  The  total  cost  of  municipal 
water  works  in  110  cities  owning  water  plants  and  having  a 
population  of  more  than  30,000,  was  upwards  of  $581,000,000, 
as  reported  in  1905. 1  New  York  City  alone  is  now  undertak¬ 
ing  water  works  improvements  the  estimated  cost  of  which  is 
about  $162,000,000.  Los  Angeles  is  constructing  an  aqueduct 

1  Special  Reports,  Bureau  of  the  Census,  “Statistics  of  Cities  having  a  popula* 
tion  of  over  30,000,  1905,”  p.  246. 


WATER  SUPPLY  FRANCHISES. 


399 


23'0  miles  long,  which  is  expected  to  cost  $23,000,000.  The 
Spring  Valley  Water  Company  of  San  Francisco  has  a  plant 
upon  which  it  claims  to  have  spent  about  $30,000,000.  The 
new  water  works  of  New  Orleans  have  cost  nearly  $7,000,000, 
and  the  people  of  Omaha  have  just  voted  a  bond  issue  of 
$6,500,000  for  the  purchase  of  the  water  plant.  If  we  had 
the  figures  for  the  hundreds  of  municipal  and  private  plants 
in  the  smaller  cities,  to  add  to  the  figures  just  given,  we 
should  probably  find  that  the  total  investment  in  water  plants 
for  municipal  supplies  would  be  considerably  more  than  a 
billion  dollars.  It  is  clear  that  in  a  field  requiring  such 
enormous  expenditures  and  supplying  the  public  utility  which, 
of  all  public  utilities,  is  most  essential  for  the  common  wel¬ 
fare  and  the  individual  life  of  the  denizens  of  cities,  private 
interests,  if  given  any  considerable  leeway,  would  establish 
an  intolerable  tyranny. 

189.  Uses  of  water  derived  from  public  supplies _ I  have 

referred  in  a  preceding  section  to  the  paramount  importance 
of  water  as  a  municipal  utility.  Except  in  those  portions  of 
the  country  in  which  the  rainfall  is  scanty,  it  is  comparatively 
easy  for  individuals  to  supply  themselves  with  water  for 
necessary  uses  until  population  becomes  congested.  With 
the  growth  of  towns,  however,  the  uses  of  water  multiply  and 
the  supply  available  to  individual  enterprise  becomes  greatly 
restricted.  Wells,  which  in  the  country  and  in  the  small 
towns  furnish  drinking  water,  may  fail  on  account  of  con¬ 
gestion  or  become  polluted  through  the  influence  of  sewage 
and  other  wastes,  so  that  the  individual  citizen  becomes  ab¬ 
solutely  dependent  upon  co-operative  enterprise  for  the  sup¬ 
plying  of  this  fundamental  necessity  of  life.  The  wastes 
which,  unless  removed,  tend  to  contaminate  the  local  sources 
of  water  supply,  cannot  be  removed  except  by  means  of  a 
public  system  of  water  works.  In  other  words,  in  order  to 
remove  the  cause  of  the  pollution  of  individual  water  supplies 
in  cities,  it  is  necessary  to  have  a  public  supply;  a  sewerage 
system  is  impossible  without  water  works.  The  growth  of 
cities  not  only  lessens  the  relative  supply  of  water  for  drink¬ 
ing,  but  creates  another  demand  which  is  almost  equally  im¬ 
portant.  The  terrible  catastrophes  which  have  befallen  Bos¬ 
ton,  Chicago,  San  Francisco,  Baltimore  and  other  cities,  in 
spite  of  the  existence  of  water  works  maintained  at  great 


400 


MUNICIPAL  FRANCHISES. 


expense  and  fire  departments  specially  equipped  for  extin¬ 
guishing  fires  and  preventing  conflagrations,  only  show  how 
impossible  life  in  cities  would  be  if  they  had  no  fire  protec¬ 
tion.  But  the  fire  department  not  only  demands  a  great  deal 
more  water  for  use  at  particular  times  than  is  needed  for 
drinking,  but  also  demands  that  the  water  shall  be  supplied 
under  special  conditions  of  pressure  that  make  the  water 
works  much  more  expensive.  In  those  sections  of  the  coun¬ 
try  in  which  the  rainfall  is  inadequate,  the  use  of  water  for 
irrigating  gardens  and  sprinkling  lawns  and  roadways  is 
also  important  for  the  welfare  of  the  people  of  cities.  Indeed, 
the  uses  of  water  in  a  great  city  are  so  multifarious  that  al¬ 
most  every  important  function  of  the  life  of  the  community 
is  dependent  directly  or  indirectly  upon  a  satisfactory  supply. 
The  health  of  the  individual  requires  pure  water  for  drink¬ 
ing  and  plenty  of  water  for  flushing  closets  and  sewers.  The 
comfort  of  the  citizen  demands  an  abundant  supply  of  water 
for  bathing  and  for  sprinkling  lawns  and  streets.  The  econ¬ 
omic  interests  of  the  citizen  require  water  for  cooking,  for 
laundering,  for  watering  gardens,  and  in  many  cases  for 
power.  The  pleasure  of  the  citizens  demands  water  for  skat¬ 
ing  ponds,  public  fountains,  and  ponds  for  boating  and  vari¬ 
ous  other  purposes  in  the  parks. 

190.  Franchise  features  peculiar  to  water  works — The 
characteristics  of  a  franchise  for  a  public  utility  are  depend¬ 
ent  upon  the  uses  of  the  utility  and  the  means  necessary  for 
its  supply.  Water  is  almost  alone  among  public  utilities  in 
the  fact  that  it  is  a  natural  rather  than  an  artificial  product ; 
although  it  must  be  said  that  the  process  of  filtration,  where 
it  is  necessary,  is  equivalent  to  a  process  of  manufacture. 
Pure  water  must  be  “  produced  ”  where  it  cannot  be  procured. 
In  order  to  procure  a  sufficient  supply  of  water,  it  is  usually 
necessary  for  a  municipality  to  go  outside  of  its  own  limits. 
This  immediately  introduces  a  question  of  jurisdiction  which 
is  of  great  importance  both  in  the  relations  of  the  city  to 
other  governmental  agencies  and  in  the  relations  of  the  fran¬ 
chise-holder  to  owners  of  private  property.  A  water  supply 
for  a  city,  being  a  public  use  in  the  highest  degree,  frequently 
necessitates  the  exercise  of  the  power  of  eminent  domain  for 
the  condemnation  of  water  rights,  either  by  the  city  directly 
or  by  the  company  which  undertakes  to  supply  the  water.  In 


WATER  SUPPLY  FRANCHISES. 


401 


those  districts  in  which  irrigation  is  necessary,  as  well  as  in 
those  sections  of  the  country  in  which  population  is  dense 
and  cities  numerous,  there  frequently  arises  a  conflict  of 
interests  relative  to  water  rights,  which  cannot  be  solved 
without  placing  important  limitations  upon  the  uses  of  avail¬ 
able  water  supplies.  If  the  city  procures  its  water  supply 
from  the  mountains  or  from  lakes  or  rivers  in  a  sparsely 
settled  district,  it  requires  special  authority  to  protect  its 
sources  of  supply  from  wilfull  or  careless  pollution.  A  pri¬ 
vate  water  company  also  must  have  similar  authority. 

If  water  can  be  brought  from  an  elevation  considerably 
higher  than  the  highest  point  in  the  city  which  is  to  be  sup¬ 
plied,  the  power  of  gravity  may  be  depended  upon  for  the 
distribution,  even  for  the  pressure  necessary  for  the  ex¬ 
tinguishment  of  fires.  If,  on  the  other  hand,  the  water  must 
be  pumped  from  a  river  or  a  lake  or  from  wells  in  the  earth, 
expensive  and  powerful  machinery  must  be  provided,  ade¬ 
quate  for  all  emergencies.  In  any  case,  for  safety  in  time  of 
special  need,  reservoirs  or  standpipes  must  be  built.  Further¬ 
more,  water  is  a  thing  that  is  subject  to  the  action  of  frost,  so 
that  special  precautions  must  be  taken  to  prevent  interruption 
of  the  supply  in  winter.  For  this  reason  the  construction  of 
mains  and  house  connections  is  expensive,  because  in  a  cold 
climate  they  must  be  laid  deep  in  the  ground  where  they  can¬ 
not  be  reached  by  frost  in  the  coldest  weather.  Otherwise  it 
will  be  necessary  at  times  to  let  the  water  run  to  waste  in 
order  to  prevent  freezing  or  to  incur  great  expense  and  in¬ 
convenience  in  frequently  thawing  out  and  repairing  frozen 
pipes. 

The  operation  of  water  works,  as  a  business  proposition,  is 
considerably  affected  by  the  competition  of  bottled  water  for 
drinking  purposes  and  of  well  or  cistern  water  for  general 
domestic  purposes,  the  use  of  which  still  prevails  in  many 
cities  of  considerable  size.  On  the  other  hand,  the  demand 
of  the  municipality  for  water  for  public  purposes  is  much 
greater  than  its  demand  for  any  other  utility.  The  demand 
for  water  in  connection  with  fire  protection  alone,  not  so 
much  in  the  quantity  of  water  used  as  in  the  special  con¬ 
struction  of  mains,  hydrants  and  reservoirs  and  the  extraor¬ 
dinary  pressure  required,  constitutes  a  considerable  pro¬ 
portion  of  the  total  business  of  the  water  works.  Not  inf  re- 


MUNICIPAL  FRANCHISES. 


402 

quently,  the  regular  income  derived  from  the  city  for  water 
supplied  to  fire  hydrants  forms  the  backbone  of  a  company’s 
financial  system. 

A  private  company  authorized  under  the  law  to  supply  a 
great  city  with  water,  must  be  clothed  with  extraordinary 
powers  in  order  that  it  may  secure  an  adequate  source  of  sup¬ 
ply,  protect  the  purity  of  the  water,  and  be  enabled  to  dis¬ 
tribute  the  water  to  those  who  need  it.  Such  a  company  must, 
furthermore,  be  bound  down  with  extraordinary  restrictions 
in  order  to  insure  adequate  service  at  reasonable  rates.  The 
demand  is  universal;  the  necessity,  absolute;  the  supply,  ex¬ 
cept  for  the  precarious  competition  to  which  I  have  already 
referred,  is  monopolistic. 

191.  Characteristics  of  a  model  water  franchise.; — In  a 

paper  read  before  the  American  Water  Works  Association  on 
May  17,  1892,  Mr.  J.  Nelson  Tubbs,  C.  E.,  outlined  a  model 
water  franchise.1  His  suggestions  were  based  upon  the 
theory  that  whenever  a  water  franchise  is  granted,  there  is 
the  expectation  that  the  city  will  eventually  buy  the  plant. 
With  this  assumption  in  view,  he  stated  that  the  city,  when 
about  to  grant  a  franchise,  should  proceed  as  carefully  as 
if  it  were  about  to  build  the  works. 

“The  usual  and  proper  action  in  the  latter  case,”  said  he,  “would 
be  to  secure  the  services  of  a  competent  hydraulic  engineer  to  make  a 
thorough  examination  of  the  whole  subject,  and  to  prepare  a  detailed 
report  as  to  the  quantity  and  quality  of  water  required,  the  best  source 
of  supply,  the  best  plan  for  obtaining  the  same,  the  head  under  which 
it  should  be  delivered  to  private  consumers  and  to  the  municipality  for 
the  suppression  of  fires,  the  size,  character  and  quality  of  the  mains  to 
be  employed,  and  the  required  performance  of  the  pumping  machinery, 
if  such  is  to  be  used.” 

Mr.  Tubbs  suggested  that  every  water  franchise  should 
contain  detailed  provisions  under  the  following  heads: 

(1)  The  minimum  quantity  of  water  to  be  available  from  the  source 
of  supply  in  a  dry  season.  This  should  be  sufficient  to  meet  the 
maximum  expected  demand  at  any  time  during  a  period  of  at  least 
twenty  years  in  the  future. 

(2)  The  methods  should  be  prescribed  by  which  the  quality  of  the 
water  is  to  be  tested,  and  the  general  characteristics  of  the  water 
demanded  by  the  city  should  be  definitely  set  forth  in  the  franchise. 

(3)  The  city  should  reserve  the  right  to  determine  the  size  and  char¬ 
acter  of  the  conduit  to  be  constructed  by  the  water  company. 

(4)  Where  pumping  is  required,  the  franchise  should  contain  general 

1  Engineering  News ,  May  19, 1892  ;  Vol.  27,  p.  518. 


WATER  SUPPLY  FRANCHISES.  403 

specifications  as  to  the  engine  and  boiler-house,  chimney,  pumping 
machinery,  etc. 

(5)  The  franchise  should  specify  the  capacity  and  character  of  stand¬ 
pipes,  or  reservoirs  required. 

(6)  Authority  should  be  reserved  to  the  city  officials  to  determine  the 
character  and  location  of  the  pipe  mains  in  each  street,  the  depth  below 
grade,  and  the  location  and  style  of  gates,  hydrants  and  other  fixtures. 

(7)  The  franchise  should  contain  a  provision  to  the  effect  that  the 
size  of  mains  should  be  determined  by  the  city  in  accordance  with  a 
genera]  plan  prepared  with  the  advice  of  an  expert  engineer. 

(8)  The  material  and  workmanship  of  service  pipes  and  the  manner 
of  doing  street  work,  should  be  detailed.  The  city  should  be  protected 
from  all  liability  for  accidents. 

(9)  Provision  should  be  made  in  the  franchise  for  the  protection  of 
other  subsurface  structures. 

(10)  The  terms  and  conditions  upon  which  extensions  of  the  water 
plant  may  be  required,  should  be  specifically  set  forth. 

(11)  The  franchise  should  contain  a  clause  describing  the  tests  to  be 
applied  to  the  company’s  plant  before  the  city  accepts  the  work  and 
permits  operation. 

(12)  The  franchise  should  contain  a  detailed  schedule  of  rates  to  be 
charged  private  consumers. 

(13)  There  should  be  a  definite  time  limit  of  the  franchise.  The 
original  limit  probably  should  not  exceed  ten  years,  with  provision  for 
extension  of  time  if  desired  by  both  parties.  The  grant  should  be  as 
nearly  exclusive  as  possible. 

(14)  A  clause  should  be  inserted  to  the  effect  that  if  the  city  pur¬ 
chases  the  plant,  it  shall  have  to  pay  nothing  for  the  franchise  or  good 
will. 

“It  seems  to  the  writer,”  said  Mr.  Tubbs,  elaborating  this  point, 
“  that  in  the  nature  of  things  the  municipality  does  not  and  cannot  sell 
and  permanently  alienate  the  franchise  itself.  It  is  an  inalienable 
function  of  the  government,  and  the  municipality  can  only  lease,  for  a 
valuable  consideration,  the  right  to  temporarily  exercise  the  rights  and 
privileges  of  the  owner,  and  at  the  termination  of  the  grant  or  lease, 
the  municipal  corporation  resumes  the  active  exercise  of  this  function, 
which  had  been  temporarily  entrusted  to  an  agent.” 

(15)  The  franchise  should  describe  in  detail  the  methods  of  fixing  the 
price  to  be  paid  by  the  city  for  the  plant  in  case  of  purchase.  The 
several  kinds  of  property  to  be  included  in  the  purchase  should  be 
enumerated. 

(16)  The  franchise  should  contain  generally  comprehensive  as  well  as 
detailed  provisions  calculated  to  secure  a  system  of  water  works  well 
adapted  to  its  prospective  uses  and  needs  and  to  insure  the  manage¬ 
ment  of  the  water  works  according  to  business  principles. 

Mr.  Tubbs  argued  that  the  pursuance  of  a  franchise  policy 
in  accordance  with  the  suggestions  just  outlined,  would  be  of 
benefit  both  to  the  city  and  to  the  franchise-holder.  On  the 
one  hand,  the  city  would  be  sure  of  getting  an  adequate  water 
supply  for  the  needs  of  the  community,  with  the  reserved 


404 


MUNICIPAL  FRANCHISES. 


right  to  purchase  at  some  future  time  a  well  designed  and 
properly  constructed  plant.  On  the  other  hand,  the  company 
would  be  protected,  through  the  very  definiteness  and  elabo¬ 
rateness  of  the  conditions  under  which  it  was  operating,  from 
the  criticisms  of  the  public  and  from  the  financial  disasters 
which  are  likely  to  follow  careless  engineering  and  promotion 
schemes.  With  a  good  plant  to  start  with,  the  company 
would  be  in  position  to  demand  and  receive  an  adequate  price 
at  the  time  of  purchase  by  the  city.  It  is  perhaps  unneces¬ 
sary  to  add  that  the  private  ownership  men  in  the  American 
Water  Works  Association  did  not  give  Mr.  Tubbs  a  unani¬ 
mous  vote  of  thanks  for  his  suggestions.  They  were  especially 
offended  by  his  statement  that  when  a  municipality  resumes 
a  water  franchise,  it  should  be  under  no  obligation  to  pay 
for  it. 

192.  A  water  franchise  in  a  small  university  town— Ann 
Arbor — The  City  of  Ann  Arbor,  Michigan,  with  a  present 
population  of  only  about  15,000,  is  the  seat  of  a  great  uni¬ 
versity.  One  advantage  derived  from  this  fact  is  seen  in  the 
terms  of  its  water  works  contract,  entered  into  between  the 
city  and  the  Ann  Arbor  Water  Company  on  May  6,  1885. 1 
Under  this  contract,  which  was  ratified  a  few  weeks  later  by 
the  city  council,  the  company  acquired  the  exclusive  right  to 
construct  water  works  in  the  city.  In  return  for  this  privilege 
the  company  agreed  to  build  a  complete  system  on  the  reser¬ 
voir  and  pumping  plan.  The  top  of  the  reservoir  was  to  be 
located  not  less  than  155  feet  above  a  certain  designated 
point  in  the  business  district  of  the  city,  or  at  the  point  desig¬ 
nated  on  a  certain  map  and  plans  of  Professor  Charles  E. 
Greene,  of  the  Engineering  Department  of  the  University  of 
Michigan,  then  on  file  in  the  office  of  the  city  recorder.  It 
was  specified  that  the  reservoir  should  be  made  of  earth,  be 
puddled  with  clay,  be  paved  on  the  bottom  and  sides  with 
cobble  stones,  and  have  a  capacity  of  not  less  than  2,000,000 
gallons.  The  company  agreed  not  to  allow  the  supply  of  water 
maintained  in  the  reservoir  to  fall  below  750,000  gallons 
except  when  necessary  for  cleaning  or  in  case  of  unavoidable 
accident.  At  any  such  time  the  company  was  required  to 
maintain  by  direct  pressure  a  sufficient  supply  of  water  for 
fire  and  domestic  uses.  It  was  provided  that  the  reservoir 

1  Charter  and  Ordinances,  City  of  Ann  Arbor,  1908,  p.  180. 


WATER  SUPPLY  FRANCHISES. 


405 


should  be  cleansed  whenever  necessary  and  that  the  inlet 
pipes  should  be  one  foot  above  the  bottom  and  be  so  arranged 
that  the  water,  when  pumped  in,  would  pass  in  a  pipe  up 
through  the  water  in  the  reservoir  and  then  fall  over  on  a 
stone  rockery  for  the  purpose  of  aeration.  The  banks  of  the 
reservoir  were  to  be  seeded  and  sodded.  The  company  was  to 
furnish  pumping  machinery  capable  of  pumping  50,000  gal¬ 
lons  of  water  per  hour  into  the  reservoir  and  “  of  ample  power 
and  capacity  for  all  requirements  It  was  provided  that  the 
water  works  should  at  all  times  be  capable  of  throwing,  by 
reservoir  pressure,  six  streams  80  feet  high  at  the  court  house 
at  one  time  and,  by  direct  pressure,  the  same  number  of 
streams  110  feet  high  at  the  same  place.  The  works  must  also 
be  able  to  throw  five  streams  54  feet  high  at  the  university 
campus  by  reservoir  pressure,  or  90  feet  high  by  direct  press¬ 
ure.  The  size  and  location  of  distributing  pipes,  except  where 
changed  by  mutual  consent,  were  to  be  in  accordance  with  the 
plans  already  submitted  by  Professor  Greene,  these  plans  being 
made  a  part  of  the  contract.  The  company  was  to  lay  14 
miles  of  pipes  ranging  in  diameter  from  16  inches  to  4  inches, 
but  not  more  than  one  mile  of  4-inch  pipe  was  to  be  laid. 
All  pipes  were  to  be  first-class,  cast-iron  pipes,  and  were  to 
be  laid  below  the  freezing  point.  The  company  was  required 
to  place  and  maintain  100  fire  hydrants  and  furnish  them 
with  the  necessary  supply  of  water,  and  the  city  reserved  the 
right  to  place  additional  hydrants.  There  was  a  clause  in 
the  franchise  specifying  three  particular  makes  of  hydrants, 
any  one  of  which  might  be  used.  The  city  reserved  the  right 
to  send  an  expert  to  the  foundry  at  which  the  pipes  were 
being  cast,  to  inspect  them ;  and  the  company  agreed  that  the 
pipes  should  be  subjected  to  a  hydraulic  pressure  of  300 
pounds  to  the  square  inch  at  the  foundry  as  a  test.  If  the 
city  decided  not  to  send  its  expert  to  the  foundry,  then  the 
company  was  to  furnish  a  sworn  statement  that  the  pipes  had 
been  tested  according  to  contract.  The  company  agreed  to 
subject  its  entire  system  of  pipes,  gates  and  hydrants  to  a 
pressure  of  150  pounds  to  the  square  inch  before  the  rental 
to  be  paid  by  the  city  should  commence.  It  was  specified 
that  the  company  should  set  not  less  than  75  valves  or  gates 
answering  to  certain  general  requirements.  The  company 
was  required  to  lay  a  service  pipe  from  its  main  to  the  curb 


406 


MUNICIPAL  FRANCHISES. 


stone  for  any  person  who  might  make  application  for  water 
during  the  first  season  after  the  franchise  was  granted.  When 
the  company  had  completed  its  works,  it  was  required  to  de¬ 
posit  with  the  city  recorder  a  map  showing  the  size  and  loca¬ 
tion  of  all  its  pipes,  gates,  hydrants,  etc.  It  was  specified 
that  the  entire  works  should  be  “  first-class  in  every  respect, 
suitable  for  all  these  requirements,  full,  efficient  and  ready 
to  respond  at  all  times,  unavoidable  accidents  excepted.” 
The  city  reserved  the  right  to  use  the  water  to  test  its  hose 
and  to  afford  reasonable  practice  for  its  firemen.  The  water 
works  were  to  be  completed  and  the  water  turned  on  not  later 
than  January  1,  1886.  The  city  agreed  to  pay  the  company 
a  rental  of  $4,250  a  year  for  the  water  supplied  for  public 
purposes.  In  addition  to  this,  if  the  city  desired  additional 
hydrants,  it  was  to  pay  the  company  the  first  cost  of  them; 
but  the  company  was  to  supply  them  with  water  free.  It  was 
also  provided  that  hydrants  should  be  placed  on  the  mains 
at  the  request  of  private  parties  and  at  their  expense,  water 
in  these  cases  also  to  be  furnished  free.  The  company  agreed 
to  extend  its  pipes  beyond  the  14  miles  specified,  whenever 
ordered  to  do  so  by  the  city ;  but  for  every  700  feet  of  6-inch 
pipe  in  any  such  extension  there  was  to  be  placed  one  hy¬ 
drant,  for  which  the  city  was  to  pay  a  rental  of  $40  a  year. 

The  company  was  bound  to  furnish  at  all  times  on  request 
a  sufficient  supply  of  water,  suitable  for  domestic  purposes, 
to  any  inhabitant  of  the  city  living  adjacent  to  one  of  the 
company’s  mains,  “  at  reasonable  rates,  and  not  exceeding 
in  amount  the  average  sums  paid  by  inhabitants  of  other 
cities  of  Michigan  similarly  situated  and  of  like  population, 
and  supplied  by  private  companies  ”.  The  company  was  to 
furnish  water  for  manufacturing  purposes  and  for  railroad 
companies  on  as  reasonable  terms  as  the  terms  on  which 
water  was  being  “  furnished  by  the  average  of  other  com¬ 
panies  in  this  state  and  at  a  sum  not  to  exceed  2  cents  for  100 
gallons  All  pipes  and  special  castings  were  to  be  subjected 
“  to  a  bath  of  coal  tar  and  linseed  oil,  according  to  Dr.  Angus 
Smith’s  formulas  ”.  The  company  agreed  to  furnish  water 
to  the  two  steam  railroads  entering  the  city  for  depot  and 
engine  purposes  at  a  rate  not  exceeding  $600  a  year  each. 
The  company  was  to  supply  water  for  the  seven  public  school 
houses  of  the  city  and  the  three  fire  engine  houses  for  $250 


WATER  SUPPLY  FRANCHISES. 


407 


a  year ;  water  for  washing  gutters  and  flushing  sewers  for 
$100  a  year;  water  for  two  public  drinking  fountains  for 
$150  a  year;  and  water  for  any  additional  school  houses  in 
the  future  at  the  rate  of  $25  a  year  each.  For  the  prices 
mentioned  the  city  was  to  have  all  the  water  it  might  require 
at  the  places  designated  “  for  water  closets,  urinals,  drinking 
purposes,  washing,  washing  hose,  for  supplying  steam  boilers, 
and  for  the  use  of  hand  hose,  for  washing  windows  in  all  the 
above  buildings  and  for  sprinkling  the  lawns,  including  the 
court  house  lawn,  connected  with  the  same  ”.  The  city  agreed 
not  to  allow  the  water  to  run  to  waste  and  not  to  use  it 
for  motive  power,  and  also  agreed  not  to  permit  water  to  be 
taken  from  the  public  drinking  fountains  for  private  use. 
The  company  was  to  protect  the/ city  from  law  suits  and 
claims  resulting  from  the  construction  or  maintenance  of  the 
water  works  and  to  furnish  a  bond  for  the  purpose.  The  com¬ 
pany’s  franchise  rights  were  to  extend  to  all  streets  of  the 
city  and  no  competitive  grant  was  to  be  made  by  the  city 
until  it  had  purchased  the  water  works  or  the  franchise  had 
been  forfeited  or  the  company’s  rights  had  expired  with  the 
expiration  of  its  charter,  the  life  of  all  corporations  being 
limited  to  thirty  years  in  Michigan.  The  city  reserved  the 
right  to  purchase  the  entire  water  plant  “at  any  time  they 
choose  ”,  and  in  case  the  parties  could  not  agree  as  to  the 
price,  three  commissioners  were  to  be  appointed  by  a  judge 
of  the  Supreme  Court  of  the  state  to  make  an  award,  which 
should  be  binding  on  both  the  city  and  the  company. 

By  an  ordinance  approved  March  16,  1906,  the  City  of  Ann 
Arbor  fixed  the  schedule  of  maximum  rates,  repealing  a  pre¬ 
vious  schedule  that  had  been  fixed  some  years  before.1  The 
flat  rate  for  dwelling  houses  was  $2.50  a  year  for  the  first 
four  rooms  occupied  by  one  family  and  50  cents  for  each  ad¬ 
ditional  room.  For  each  regular  boarder  25  cents  was  added ; 
for  one  bath  tub,  $2.50;  and  for  each  additional  bath  tub, 
$1;  for  one  self-closing  water  closet  and  wash  bowl  with 
faucet,  $3 ;  and  for  each  additional  water  closet,  $1 ;  for  a 
hydraulic  pump  operated  by  city  water,  schedule  rates  for  the 
fixtures  served  by  the  pump ;  and  for  yard  hydrants  where  the 
water  was  to  be  used  for  domestic  purposes,  $3  in  addition 
to  the  sprinkling  rate.  Any  water  consumer  was  authorized 

1  Charter  and  Ordinances,  op.  cit p.  844. 


408 


MUNICIPAL  FRANCHISES. 


to  install  a  meter  on  his  premises,  but  he  was  required  to 
keep  it  in  good  condition  and  repair  at  his  own  expense. 
The  meter  rates  were  fixed  on  a  sliding  scale,  beginning  with 
20  cents  per  thousand  gallons  for  a  daily  consumption  of  less 
than  that  amount;  15  cents  a  thousand  for  a  daily  consump¬ 
tion  of  from  1,000  to  3,000  gallons;  and  10  cents  a  thousand 
for  a  daily  consumption  in  excess  of  3,000  gallons.  The 
minimum  charge  for  metered  water,  however,  was  to  be  $5 
a  year.  A  sprinkling  rate  of  $4  a  year  was  fixed,  and  the 
sprinkling  season  was  to  extend  from  April  1  to  October  31. 
Each  person  paying  the  sprinkling  rate  was  entitled  to  use 
one  stream  of  water  through  a  3-16  inch  nozzle  four  hours 
each  day  during  the  season ;  but  no  sprinkling  was  to  be 
done  during  a  fire  alarm.  Special  building  rates  were  fixed, 
and  it  was  provided  that  rates  not  named  in  the  ordinance 
were  to  be  subject  to  agreement,  but  without  discrimination 
as  between  different  applicants  for  any  particular  service. 
The  company  was  authorized  to  collect  its  rates  quarterly  in 
advance  and  to  turn  off  the  water  from  any  premises  for  non¬ 
payment.  For  metered  water  the  company  could  make 
monthly  collections. 

On  the  same  date  when  the  ordinance  just  described  was 
passed,  the  council  created  a  “  board  of  complaint  ”  to  con¬ 
sist  of  three  freehold  electors  appointed  by  the  mayor.1  Upon 
this  board  was  conferred  the  power  to  “  hear,  investigate,  re¬ 
port  upon  and  advise  the  council  upon  every  complaint  rel¬ 
ative  to  the  water  supply  and  service  to  the  city  and  its  in¬ 
habitants,  whether  made  by  individuals  or  by  the  Ann  Arbor 
Water  Company.”  Complaints,  however,  were  to  be  made 
in  writing  and  a  public  hearing  was  to  be  had  if  desired  by 
either  party.  This  board  was  required  to  report  at  least  once 
a  month  to  the  council,  setting  forth  the  number  and  nature 
of  complaints  made  before  them;  their  conclusions,  with  the 
reasons  therefor;  and  such  recommendations  as  they  might 
deem  proper 

On  the  same  date  also  another  ordinance  was  passed  re¬ 
quiring  the  company  to  make  and  file  with  the  city  clerk, 
under  the  oath  of  one  of  its  officers,  an  annual  report  showing 
the  total  amount  of  money  actually  invested  in  the  property; 
the  actual  amount  of  investment  derived  from  the  sale  of 


1  Charter  and  Ordinances,  op.  cit.,  p.  348. 


WATER  SUPPLY  FRANCHISES. 


409 


bonds,  from  payments  on  stock  and  from  earnings;  the  gross 
income  for  the  year,  specifying  separately  the  amounts  re¬ 
ceived  “  from  the  city,  from  the  University  of  Michigan,  from 
commercial  purposes,  and  from  domestic  services”;  the  total 
operating  expenses  for  the  year,  specifying  separately  the 
amounts  paid  for  salaries,  fuel,  repairs,  taxes,  insurance  and 
other  operating  expenses;  the  sums  paid  for  renewals,  ex¬ 
tensions,  interest  and  dividends;  the  number  of  services  of 
each  of  an  enumerated  list  of  kinds  and  the  revenue  received, 
and  the  total  number  of  gallons  of  water  pumped  for  each 
month  during  the  year.1 

193.  A  city  dominated  by  a  water  company— New  Haven. 

— In  Connecticut  local  franchises  are  granted  by  direct  act 
of  the  state  legislature.  The  privately  owned  water  works 
which  supply  the  City  of  New  Haven  were  made  the  subject 
of  expert  inquiry  by  the  National  Civic  Federation  Commis¬ 
sion  on  Public  Ownership  and  Operation,  which  reported  in 
1907.  The  inquiry  in  regard  to  the  franchises  and  general 
history  of  the  New  Haven  company  was  conducted  by  Pro¬ 
fessor  John  H.  Gray,  now  of  the  University  of  Minnesota.2 
As  early  as  1853  the  City  of  New  Haven  voted  to  issue  bonds 
for  a  municipal  water  supply.  A  provisional  contract  was 
entered  into  by  the  board  of  water  commissioners ;  but  oppo¬ 
sition  developed  and  the  next  year,  when  the  matter  came  up 
for  final  ratification  by  the  people,  the  scheme  was  voted 
down.  The  New  Haven  Water  Company  had  been  chartered 
by  the  legislature  in  1849  to  supply  the  City  of  New  Haven 
with  water.  The  amount  of  its  capital  was  not  to  exceed 
$200,000.  There  was  no  reference  in  its  charter  to  the  issue 
of  bonds,  no  restriction  upon  rates  or  dividends,  no  provision 
for  audit  and  nothing  as  regards  the  source  of  supply.  No 
mention  was  made  of  taxes  or  compensation,  and  there  was 
no  provision  for  making  returns  to  the  city  or  the  state  or 
for  public  reports.  The  water  supplied  by  the  company  was 
to  be  “  pure  ”  and  the  company’s  books  were  to  be  open  to 
the  inspection  of  the  stockholders.  This  charter  was  amended 
in  1851  so  as  to  give  the  company  the  right  to  take  water 
from  any  stream  below  the  point  where  power  was  used  for 


*  Charter  and  Ordinances,  op.  cit.,  p.  850. 

1  See  “  Municipal  and  Private  Operation  of  Public  Utilities  ”  ;  Part  2,  Vol.  1,  pages 
1  to  135. 


410 


MUNICIPAL  FRANCHISES. 


mills.  The  company  was  also  authorized  to  construct  the 
necessary  reservoirs  and  canals  and  to  exercise  the  right  of 
eminent  domain  for  the  acquisition  of  private  property 
needed  for  the  enterprise.  In  1856  the  legislature  permitted 
an  increase  of  capital  stock  to  $450,000  and  authorized  the 
company  to  borrow  money  at  a  rate  of  interest  not  exceeding 
7  per  cent,  the  total  amount  of  loans  to  be  limited  to  one- 
half  the  amount  of  capital  stock  paid  in  and  invested.  In 
1859  the  company  undertook  the  construction  of  a  water 
works  plant.  By  an  amendment  of  its  charter  in  1860  the 
company  was  authorized  to  establish  public  hydrants  wherever 
it  desired,  to  lay  pipes  to  any  house  or  building  with  the 
owner’s  consent,  to  regulate  the  use  of  water  supplied  by  it 
within  and  without  the  City  of  New  Haven,  and  to  “  estab¬ 
lish  the  prices  or  rents  to  be  paid  therefor  ”.  The  company 
was  also  given  authority  to  prevent  the  waste  or  stealing  of 
water  and  for  this  purpose  had  the  right  of  entry  to  private 
property.  Anyone  who  wantonly  injured  the  water  or  prop¬ 
erty  of  the  company  was  required  to  pay  treble  damages.  In 
1863  the  company’s  charter  was  amended,  specifically  author¬ 
izing  the  issue  of  $200,000  of  bonds,  it  being  recited  in  the 
legislative  act  that  the  company  had  already  expended  $400,- 
000  on  its  plant.  In  1871  the  company’s  charter  was  further 
amended  so  as  to  authorize  a  total  capital  stock  of  $1,000,000 
and  a  total  bond  issue  of  one-half  the  amount  of  stock  issued. 

In  the  meantime  the  company  had  been  subjected  to  the 
danger  of  competition  and  had  felt  itself  compelled  to  oppose 
in  the  legislature  various  attempts  on  the  part  of  other  com¬ 
panies  to  secure  the  right  to  furnish  water  in  the  same  terri¬ 
tory.  After  several  years’  struggle  a  competing  company 
got  a  charter  ,from  the  legislature,  which  was  conditioned 
upon  its  being  ratified  by  popular  vote  of  the  city.  At  the 
election  the  people  favored  competition  by  a  vote  of  2,978  for, 
to  116  against.  The  new  company  was  absorbed,  however,  by 
the  New  Haven  Water  Company  in  1876. 

In  1880  the  company’s  authorized  capital  stock  was  again 
increased  to  $1,500,000,  to  be  paid  in  cash  or  its  equivalent, 
and  the  company  was  required  to  offer  its  new  shares  to  exist¬ 
ing  stockholders.  In  1889  the  authorized  capital  stock  was 
still  further  increased  to  $2,000,000,  with  a  similar  provision 
that  new  shares  should  be  offered,  not  below  par,  to  existing 


WATER  SUPPLY  FRANCHISES. 


411 


stockholders.  The  bonds  issued  by  the  company  were  not  to 
exceed  $1,000,000  and  were  not  to  exceed  one-half  of  the 
sum  “  actually  expended  in  the  construction  or  purchase  of 
its  works  ”.  It  was  not  till  1895  that  specific  legislative 
sanction  was  secured  for  the  consolidation  with  the  compet¬ 
ing  company,  which  had  been  effected  19  years  earlier. 
Finally,  in  1897,  the  company’s  authorized  capital  stock  was 
increased  to  $3,000,000,  and  the  limitation  of  the  bonds  to 
one-half  the  amount  actually  invested  in  the  company’s  works 
was  omitted.  The  only  limitation  upon  bond  issues  was  that 
they  should  not  exceed  one-half  of  the  capital  stock  outstand¬ 
ing  at  that  time.  By  amendments  to  its  charter  at  various 
times,  the  company  secured  the  right  to  serve  a  considerable 
number  of  towns  outside  the  City  of  New  Haven. 

The  first  contract  which  the  company  entered  into  with  the 
city  was  ratified  by  a  city  meeting  February  15,  1862.  Under 
this  contract  the  company  agreed  to  furnish  water  for  public 
purposes  for  a  period  of  20  years  wherever  its  pipes  were  at 
any  time  laid.  At  the  date  of  the  contract  16  miles  of  pipes 
had  been  laid,  and  the  company  agreed  to  lay  10  miles  more 
within  six  years.  The  city  reserved  the  right  to  annul  the 
contract  for  wilful  neglect  or  refusal  on  the  part  of  the  com¬ 
pany  to  furnish  water.  The  city  was  to  establish  at  its  own 
expense  as  many  hydrants  as  it  saw  fit.  The  price  to  be  paid 
by  the  city  for  water  for  public  purposes  was  arranged  on  an 
increasing  scale  until  it  reached  a  maximum  of  $6,000  a 
year  in  1868,  this  rate  continuing  from  that  time  on  until 
the  end  of  the  contract  period.  The  city  under  this  contract 
was  given  the  right  to  purchase  the  property  and  franchises 
of  the  company  after  10  years  by  paying  the  company  the 
amount  it  had  actually  expended  on  its  works,  plus  a  sum 
sufficient,  with  the  dividends  that  had  been  actually  paid  by 
the  company,  to  make  a  10  per  cent  annual  return  on  the  in¬ 
vestment  up  to  the  date  of  purchase.  If  the  company  wil¬ 
fully  neglected  or  refused  to  furnish  water  under  its  contract, 
it  was  bound  to  pay,  in  case  of  conviction,  a  minimum  of 
$10  for  actual  damages.  The  city  had  the  right  to  renew  the 
contract  at  its  expiration  on  terms  to  be  fixed,  in  case  the 
parties  could  not  agree,  by  a  commission  to  be  appointed  by  a 
judge  of  the  superior  court  on  the  city’s  application.  This  ♦ 
commission  was  to  consist  of  one  stockholder  residing  in  the 


412 


MUNICIPAL  FRANCHISES. 


city  and  two  persons  not  stockholders,  one  residing  in  the 
city  and  one  outside. 

As  the  end  of  the  twenty-year  period  covered  by  this  con¬ 
tract  approached,  a  demand  for  public  ownership  developed. 
An  act  of  the  legislature  was  procured  authorizing  the  com¬ 
pany  to  sell  and  the  city  to  purchase  under  the  conditions 
named  in  the  contract,  and  requiring  the  question  of  purchase 
to  be  submitted  to  popular  vote  in  November,  1881.  The 
company  was  required  by  this  act  to  submit  an  itemized 
statement  of  its  investment,  its  paid-up  capital  stock,  and  the 
amount  it  considered  that  the  city  would  have  to  pay  under 
the  terms  of  the  contract.  The  act  also  authorized  the  ap¬ 
pointment  of  an  investigating  committee,  with  expert  ac¬ 
countants,  with  power  to  summon  witnesses,  take  testimony 
and  inspect  the  company’s  books  in  order  to  determine  what 
amount  should  he  paid  for  the  works.  The  city  was  author¬ 
ized  to  issue  bonds  to  the  amount  of  $2,000,000  at  5  per  cent 
for  the  purchase  of  the  plant.  Professor  Simeon  E.  Baldwin 
was  appointed  chairman  of  this  committee.  The  company 
submitted  a  statement  to  the  city,  claiming  $2,222,236  as 
the  sum  which  the  city  would  have  to  pay  under  the  contract. 
The  committee,  upon  investigation,  found  this  sum  to  be 
$1,464,297.  The  chief  difference  in  the  two  estimates  was 
due  to  a  claim  on  the  part  of  the  company  for  compound  in¬ 
terest  at  6  per  cent  on  the  10  per  cent  annual  dividends  al¬ 
lowed  under  the  contract.  This  claim  was  denied  by  the  com¬ 
mittee.  The  committee  recommended  the  immediate  pur¬ 
chase  of  the  works  and  declared  that  under  the  contract  the 
plant  could  be  bought  for  much  less  than  it  was  worth  on  the 
basis  of  its  earnings.  The  corporation  counsel  was  instructed 
by  the  city  to  apply  to  the  Superior  Court  for  a  determination 
of  the  amount  to  be  paid  to  the  company.  The  petition  was 
filed  with  the  court  on  September  15,  1881,  less  than  two 
months  before  the  date  fixed  under  the  statute  for  the  elec¬ 
tion.  The  board  of  appraisers  appointed  by  the  court  did  not 
organize  until  October  5.  They  made  their  report  on  Novem¬ 
ber  2,  six  days  before  the  popular  vote  was  to  be  taken,  fixing 
the  total  sum  to  be  paid  by  the  city  at  about  $1,100,000. 
The  report  of  the  appraisers  was  not  immediately  confirmed 
by  the  court;  and  the  company,  by  active  political  methods, 
secured  a  vote  of  the  people  adverse  to  public  ownership,  the 


WATER  SUPPLY  FRANCHISES. 


413 


exact  vote,  as  recorded,  being  3,198  for,  to  5,068  against. 
The  company  thereupon  entered  a  remonstrance  against  the 
court’s  approving  the  report  of  the  board  of  appraisers  on 
the  ground  that  the  vote  of  the  people  had  settled  the  matter. 
The  city,  on  the  other  hand,  claimed  that  nothing  had  been, 
settled  by  the  popular  vote,  inasmuch  as  there  was  still  two 
months’  time  under  the  contract  for  the  city  to  exercise  its 
option  of  purchase,  and  claimed  that  the  company  had  wil¬ 
fully  carried  on  a  campaign  before  the  election  to  make  the 
people  believe  that  the  court  would  award  over  $1,800,000 
as  the  price  to  be  paid  by  the  city.  The  city  also  claimed 
that  the  company  had  improperly  spent  large  sums  of  money, 
amounting  to  many  thousands  of  dollars,  *  for  influencing 
public  opinion,  “to  bribe,  corrupt,  mislead  and  unduly  in¬ 
fluence  large  numbers  of  said  freemen  to  vote  against  said 
purchase”.  No  definite  action  having  been  immediately 
taken  by  the  court,  the  city  soon  entered  into  negotiation 
with  the  company  for  a  new  contract.  Professor  Baldwin  had 
seen  clearly  that  the  question  at  issue  was  the  value  of  the 
franchise  and  warned  the  people  in  a  public  letter  that  if 
they  did  not  buy  under  the  old  contract,  they  would  never 
have  another  opportunity  to  take  over  the  plant  without  pay¬ 
ing  full  value  for  the  company’s  franchise  rights,  which  in 
his  opinion  were  worth  $1,000,000.  “  Professor  Baldwin 

knew  a  good  thing  when  he  saw  it,”  reports  Dr.  Gray ;  “  he 
soon  afterward  became  a  shareholder  of  the  company,  and 
also  counsel  for  the  company.” 

The  second  general  contract  entered  into  by  the  city  with 
the  New  Haven  Water  Company  was  dated  December  15, 
1881,  and  was  to  run  for  a  period  of  10  years,  with  the  option 
on  the  part  of  the  city  to  renew  it  indefinitely  for  ten-year 
periods  on  terms  to  be  fixed,  in  case  of  disagreement,  by  three 
arbitrators.  The  company  was  not  bound  under  this  con¬ 
tract  to  extend  its  pipes,  but  it  agreed  to  furnish  water  for 
all  public  purposes,  except  the  alms-house,  within  the  city 
limits  for  $16,000  a  year.  This  contract  provided  that  rates 
for  water  to  private  consumers  should  never  be  increased 
above  the  rates  charged  at  the  time.  The  purchase  clause 
under  the  new  contract  provided  that  the  city  might  take 
over  the  works  and  franchises  of  the  company  at  any  time  at 
a  fair  cash  value  to  be  fixed  by  arbitrators.  The  company 


414 


MUNICIPAL  FRANCHISES. 


agreed  not  to  compel  consumers  to  use  meters,  but  to  give 
them  the  choice  of  flat  rates  or  metered  service.  Any  person 
within  reach  of  the  company’s  mains,  or  who  would  lay  con¬ 
nections  to  the  mains,  was  to  be  supplied  by  the  company.  If 
the  company  charged  a  higher  rate  than  was  allowed  under 
the  contract  or  refused  to  carry  out  the  provision  requiring 
it  to  supply  water,  it  was  required  to  pay  a  minimum  of  $20 
as  punitive  damages.  The  city  agreed  to  drop  its  pending 
litigation  for  the  purchase  of  the  plant,  and  both  the  city  and 
the  company  agreed  to  ask  the  legislature  to  ratify  this  con¬ 
tract  and  make  it  a  part  of  the  company’s  charter  and  also 
a  part  of  the  city  charter.  This  action  was  taken  by  the 
legislature  at  its  next  session. 

This  contract  was  renewed  in  1891  without  much  excite¬ 
ment,  but  ten  years  later  there  was  a  general  agitation  for  a 
new  arrangement.  The  company  had  perpetual  rights  in  the 
streets  under  its  charter  from  the  legislature,  and  by  its  con¬ 
tract  with  the  city  in  1881  had  placed  itself  in  a  position 
where  it  was  safe  against  municipal  purchase  except  on  con¬ 
dition  that  the  city  pay  the  full  value  of  these  perpetual 
rights.  When  the  matter  of  renewing  the  contract  came  up 
in  1901,  the  president  of  the  common  council  and  several 
other  members  were  employes  of  the  company  and  the  cor¬ 
poration  counsel  was  the  brother  of  the  secretary  of  the 
company.  Through  its  whole  history  the  company,  accord¬ 
ing  to  Dr.  Gray’s  report,  “  had  always  exercised  a  very  large 
influence  on  the  political  life  of  the  community,  and  had 
never  been  without  powerful  friends  in  official  positions  in 
the  city  government  ”.  It  is  no  wonder  that  the  special 
committee  appointed  by  the  president  of  the  council  in  1901 
was  friendly  to  the  company’s  interests.  It  should  be  noted 
that  in  New  Haven  the  legislative  body  consists  of  two 
branches,  the  common  council  and  the  board  of  aldermen, 
and  that  the  investigation  of  important  matters  is  under¬ 
taken  by  joint  committees.  The  action  of  the  first  committee 
not  being  satisfactory,  it  was  discharged  and  the  rules  of  the 
common  council  were  changed  so  as  to  deprive  the  president 
of  the  right  to  appoint  the  committeemen.  A  new  committee 
was  appointed  only  three  weeks  before  the  date  on  which  the 
existing  contract  would  expire.  Those  opposed  to  the  com¬ 
pany’s  demands  claimed  that  they  never  had  a  fair  hearing. 


WATER  SUPPLY  FRANCHISES. 


415 


They  carried  on  an  active  campaign  to  influence  public  senti¬ 
ment  and  charged  fraud,  corruption  and  bribery  in  connec¬ 
tion  with  the  negotiations.  The  company  submitted  three 
propositions  to  the  city.  It  was  willing  to  take  a  ten-year 
contract,  renewable  on  the  same  terms  for  successive  periods 
of  ten  years  at  the  city’s  option,  with  provisions  that  the  city 
should  pay  $20,000  a  year  for  public  water,  that  rates  to 
private  consumers  should  not  be  increased,  and  that  the  city 
should  have  the  right  to  purchase  for  a  just  and  fair  com¬ 
pensation  at  any  time.  As  a  first  alternative,  the  company 
was  willing  to  accept  a  thirty-year  contract  under  which  it 
would  furnish  public  water  free  and  agree  not  to  raise  rates 
for  private  consumers.  Under  this  proposition  the  city  was 
to  have  the  right  to  purchase  only  after  a  judicial  determina¬ 
tion  to  the  effect  that  the  company  had  violated  its  contract. 
A  further  provision  in  this  second  offer  required  the  city  to 
protect  the  company  from  the  payment  of  any  other  taxes 
than  those  that  were  being  paid  at  the  time.  At  the  end  of 
the  thirty-year  contract,  if  the  city  did  not  wish  to  renew  the 
agreement  for  another  period  of  the  same  duration,  the  plant 
might  be  purchased  without  any  proof  that  the  contract  had 
been  violated.  The  other  alternative  offered  by  the  company, 
the  one  which  was  finally  accepted,  was  in  form  a  perpetual 
contract,  with  free  water  for  all  public  purposes.  The  city 
was  authorized  to  erect  as  many  hydrants  as  it  pleased.  The 
city  also  reserved  the  right  to  have  the  rates  to  private  con¬ 
sumers  readjusted  by  arbitration  once  in  five  years.  It  was 
provided,  however,  that  the  arbitrators  should  not  fix  the  rates 
at  a  point  too  low  to  pay  all  operating  costs,  renewals,  ex¬ 
tensions,  and  every  other  kind  of  expense,  including  interest 
on  funded  and  unfunded  debt,  and  in  addition  thereto  an  8 
per  cent  dividend  on  the  company’s  existing  capital  stock,  to¬ 
gether  with  a  reasonable  return,  not  exceeding  8  per  cent, 
upon  other  capital  that  might  be  invested  from  time  to  time 
in  additions  or  extensions  of  the  plant.  This  clause  for  read¬ 
justment  of  rates  is  evidently  a  fraud.  Under  it  the  com¬ 
pany  has  the  right  to  provide  for  renewals  and  extensions 
out  of  earnings,  so  far  as  it  can  do  so  under  existing  rates. 
This  would  enable  the  company  to  keep  up  and  build  up  its 
property  at  the  expense  of  the  consumers,  all  the  time  receiv¬ 
ing  a  guaranteed  dividend  of  8  per  cent  on  the  capital  stock 


416 


MUNICIPAL  FRANCHISES. 


now  outstanding.  Whenever  the  city  desired  to  purchase  the 
works,  however,  it  would  be  compelled  to  pay  a  price  which 
would  cover  not  only  the  amount  of  investment  represented 
by  the  outstanding  share  capital,  but  also  the  additional  in¬ 
vestment  that  had  been  made  from  current  earnings.  In 
this  way  the  shareholders  secure  a  practically  guaranteed 
return  far  in  excess  of  the  average  return  upon  invested 
capital,  with  the  prospect  of  securing  a  price  at  the  time  of 
sale  much  larger  even  than  would  be  warranted  on  the  basis 
of  the  dividend  rate.  Under  this  contract  the  city  has  the 
right  to  purchase  at  the  end  of  25  years  and  at  the  end  of 
each  succeeding  25-year  period. 

The  city  has  bound  itself,  under  this  contract,  not  to  dis¬ 
tribute  water,  but  must  take  its  supply  from  the  company. 
Inasmuch  as  the  city  has  no  authority  to  grant  a  franchise 
to  any  other  company,  the  contract  is  in  effect  an  exclusive 
one  and  binds  the  city,  hand  and  foot,  in  its  dealing  with  the 
problem  of  water  supply. 

The  provision  in  regard  to  taxation  contained  in  the  com¬ 
pany’s  original  proposition,  was  somewhat  modified.  As  it 
now  stands,  the  city  has  the  option  of  holding  the  company 
harmless  from  other  taxes  than  those  on  tangible  property, 
or,  in  lieu  of  that,  of  paying  the  company  an  annual  rental  of 
$20  per  hydrant  for  water  used  for  fire  purposes  and  of 
paying,  for  water  used  for  other  purposes,  25  per  cent  less 
than  the  lowest  meter  rate  to  private  consumers. 

There  was  a  great  outcry  against  the  passage  of  this  con¬ 
tract.  Its  opponents  insisted  on  an  investigation  of  their 
charges  of  bribery  and  fraud,  and  a  secret  investigation  was 
made  by  the  city  attorney  and  the  assistant  state’s  attorney. 
Nothing  came  of  it,  however.  The  fight  was  carried  to  the 
legislature  and  before  the  governor,  but  without  effect.  This 
contract,  like  that  of  1881,  was  confirmed  by  the  legislature 
and  made  a  part  of  the  company’s  charter  and  a  part  of  the 
city  charter.  The  opponents  of  the  contract,  although  unable 
to  prevent  its  passage  and  ratification,  had  sufficient  influence 
with  the  people  so  that,  of  all  the  members  of  the  common 
council  who  voted  for  it,  only  one  was  reelected. 

The  history  of  the  New  Haven  Water  Company,  in  connec¬ 
tion  with  its  charter  rights  secured  from  the  legislature  and 
its  contract  rights  secured  from  the  city,  clearly  illustrates 


WATER  SUPPLY  FRANCHISES. 


417 


the  danger  of  private  ownership  of  public  water  supplies. 
The  spectacle  of  a  city  government  passing  upon  a  contract 
involving  the  essential  rights  of  all  the  citizens  of  a  great 
city,  when  many  of  the  most  influential  members  of  the  gov¬ 
ernment  are  at  the  same  time  on  the  pay-rolls  of  the  company 
securing  the  contract,  is  one  that  ought  not  to  be  possible  in 
an  enlightened  community,  the  home  of  a  great  American 
university. 

194.  A  city  having  adequate  power  of  control— Indiana¬ 
polis.  —  Under  the  Indiana  general  municipal  corporations 
act  of  1905,  the  city  council  of  Indianapolis  has  the  power  to 
license  and  regulate  the  supply,  distribution  and  consump¬ 
tion  of  water,  to  regulate  the  laying  of  mains  and  pipes,  to  fix 
the  price  of  water  by  contract  or  franchise,  and  to  compel  the 
performance  of  contracts  for  the  extension  of  mains.1  The 
city  also  has  the  right  to  regulate  the  making  of  connections 
with  water  pipes  and  to  compel  property  owners  to  make  such 
connections  before  streets  are  improved.  The  council  has  the 
right  to  investigate  “  the  affairs  of  any  corporation,  firm  or 
person  in  which  the  city  may  be  interested,  or  with  which  it 
may  have  entered  into  a  contract,  or  may  be  about  to  do  so 
For  such  investigation  the  council  may  require  the  production 
of  books  and  papers  and  may  compel  anyone  to  testify,  even 
against  his  own  interests.  The  board  of  public  works  is 
authorized  to  contract  for  a  supply  of  water  for  public  or 
private  uses.  This  board  may,  if  authorized  by  ordinance 
approved  by  popular  vote,  purchase  the  necessary  lands  and 
materials  and  construct  and  operate  a  water  plant,  or  it  may 
purchase  and  hold  stock  in  water  companies.  In  case  munici¬ 
pal  water  works  are  established,  the  city’s  jurisdiction  will 
extend  ten  miles  beyond  its  limits  for  the  purpose  of  prevent¬ 
ing  pollution  of  the  source  of  supply.  The  city  is  also  author¬ 
ized  to  take  over  a  private  plant  either  by  purchase  or  by 
condemnation;  but  this  power  is  radically  limited  by  a  pro¬ 
vision  that  the  indebtedness  incurred  in  connection  with  the 
purchase  or  construction  of  water  works,  added  to  the  other 
indebtedness  of  the  city,  shall  not  make  a  sum  in  excess  of 
two  per  cent  of  the  value  of  taxable  property  within  the  city 
limits.  The  city  is  authorized,  in  granting  a  private  water 
franchise,  to  agree  with  the  company  upon  the  terms  and 

1  National  Civic  Federation  Report,  1907,  op.  cit Part  II,  Vol.  1,  p.  65. 


418 


MUNICIPAL  FRANCHISES. 


prices  for  public  and  private  use,  “  as  well  as  for  reasonable 
license  fees,  or  other  compensation  ”  for  the  franchise.  Such 
franchise  must  be  limited  to  25  years,  and  the  city  is  author¬ 
ized  to  borrow  money  for  the  purpose  of  purchasing  stock  in 
any  water  company  to  which  it  has  granted  a  franchise. 
There  appears  to  be  no  limit  upon  the  amount  which  it  may 
borrow  for  such  purpose.  Under  the  law  a  private  company 
has  the  right  to  condemn  necessary  lands  and  waters  within 
or  without  the  city. 

It  will  be  seen  from  this  outline  of  the  Indiana  law  that 
the  City  of  Indianapolis  is  in  a  much  better  position  to  deal 
with  the  problem  of  water  supply  than  is  the  City  of  New 
Haven,  whose  troubles  were  described  in  the  last  section. 
As  a  matter  of  fact,  the  City  of  Indianapolis,  on  January  3, 
1870,  granted  a  water  franchise  to  a  private  company,  which 
had  been  incorporated  during  the  preceding  year.1  This 
grant  included  the  right  to  construct,  maintain  and  operate 
water  works,  with  all  the  necessary  structures  and  fixtures,  to 
supply  the  City  of  Indianapolis  “  with  pure,  filtered  and 
wholesome  water”.  The  company  was  given  the  right  to 
use  all  the  streets  of  the  city  as  it  existed  at  the  time  or  as 
it  might  be  enlarged  at  any  time  thereafter.  The  company 
was  required  to  give  the  street  commissioner  three  days’ 
notice  before  commencing  work  in  any  public  street.  The 
company  was  also  required  to  restore  the  street  to  as  good 
condition  as  it  was  in  before  it  had  been  disturbed.  Upon 
failure  to  do  so,  or  in  case  the  street  surface  subsequently 
became  “  out  of  good  condition  because  of  imperfect  repairs  ”, 
the  city  reserved  the  right  to  make  the  proper  repairs  and 
charge  them  up  against  the  company.  The  company  was 
bound  to  assume  the  usual  liability  for  damages  resulting 
from  the  operation  of  its  franchise.  In  the  construction  of 
its  works  the  company  was  required  to  adopt  the  “  Holly 
System  ”,  with  all  its  latest  improvements,  and  to  provide  a 
maximum  capacity  of  6,000,000  gallons  a  day.  The  works 
were  to  be  maintained  in  a  condition  capable  of  throwing  eight 
streams  at  once  100  feet  vertically  through  one-inch  nozzles 
for  use  when  required  for  extinguishing  fires.  The  company 
was  required  to  furnish,  along  the  lines  of  its  pipes  and  con- 


1  Laws  and  Ordinances,  op.  cit.,  p.  1188. 


WATER  SUPPLY  FRANCHISES. 


419 


duits,  such  quantity  of  water  as  the  city  council  might  re¬ 
quire  “  for  public  use,  drainage  and  fire  purposes  ”.  As 
many  fire  hydrants  or  fire  plugs  as  the  city  required,  were 
to  be  erected  by  the  company.  The  city  reserved  the  right  to 
draw  from  these  hydrants  all  water  necessary  not  only  for  the 
prevention  and  extinguishment  of  fires,  but  also  for  washing, 
cleaning,  cooling,  flushing  or  sprinkling  the  streets,  gutters, 
alleys,  sewers  and  public  grounds.  The  city  was  also  author¬ 
ized  to  attach  to  each  hydrant  a  faucet  from  which  water 
might  be  drawn  by  passers-by  for  the  use  of  persons  and 
animals. 

The  company  was  required  to  furnish  the  citizens  with  as 
much  water  as  they  might  desire,  upon  the  streets  and 
avenues  in  which  mains  were  laid.  The  company  had  the 
right  to  charge  rates  equal  to  “the  average  price  paid  by 
other  cities  of  the  United  States,  and  the  citizens  thereof, 
of  like  population,  that  are  supplied  with  as  efficient  water 
works,  unless  a  less  price  may  be  agreed  upon”.  In  case 
the  company  and  the  city  council  were  unable  to  agree  upon 
a  schedule  of  rates,  then  the  rates  were  to  be  determined  by 
five  disinterested  persons,  non-residents  of  the  city,  two  of 
whom  were  to  be  chosen  by  the  company,  two  by  the  city,  and 
the  fifth  by  the  other  four.  Either  the  city  or  the  company 
had  the  right  to  demand  a  readjustment  of  rates  at  any  time 
after  the  expiration  of  one  year  from  the  date  of  the  preceding 
adjustment.  In  no  event  was  the  city  to  be  charged  more 
than  $50  a  year  for  each  hydrant.  The  water  to  be  supplied 
by  the  company  was  to  be  taken  from  wells  dug  near  the 
White  River,  “  not  connecting  with  the  river  or  any  other 
open  stream  or  channel,  so  that  the  water  of  the  wells  shall 
be  derived  from  the  natural  filtering  or  percolation  through 
the  gravel  in  its  natural  place,  provided  the  same  can  be  so 
obtained  ”. 

Provision  was  made  for  a  forfeiture  of  the  franchise  if  the 
company  failed,  by  its  own  fault,  to  have  five  miles  of  water 
pipe  laid  and  in  operation  within  18  months  from  the  date 
of  the  grant  and  15  miles  within  27  months.  The  grant  was 
also  to  be  forfeited  if  the  company  failed  to  furnish  the  city 
and  its  citizens  with  pure,  filtered  and  wholesome  water  at 
the  rates  provided  for.  In  case  the  city  or  its  citizens  were 
deprived  of  necessary  water  for  36  consecutive  hours,  through 


420 


MUNICIPAL  FRANCHISES. 


the  wilfulness  or  carelessness  of  the  company,  the  city  had 
the  alternative  of  forfeiting  the  franchise  or  of  forfeiting  the 
company’s  claim  for  payment  of  hydrant  rental  for  a  period 
of  one  year.  But  the  question  as  to  whether  there  had  been 
a  substantial  breach  of  the  provisions  of  the  ordinance,  was 
to  be  determined  by  a  judicial  decree  before  the  penalty  of 
forfeiture  was  enforced. 

The  company  was  obligated  to  extend  its  mains  along  any 
street  or  avenue  of  the  city  when  required  by  the  city  council 
to  do  so,  on  condition,  however,  that  the  city  should  furnish 
an  average  of  at  least  one  hydrant  to  every  1,000  feet  of 
pipe  in  such  extension,  hydrant  rentals  to  be  paid  by  the  city 
at  the  usual  rates.  The  company  was  required  to  provide 
and  to  keep  “  in  constant  good  condition  for  immediate 
use  ”,  suitable  steam  machinery  to  propel  its  pumps. 

On  six  months’  notice  at  any  time,  the  city  might  purchase 
the  company’s  plant  and  all  its  rights  and  privileges,  but 
was  not  to  pay  any  price  for  the  franchise  granted  by  the 
city.  In  case  the  city  and  the  company  could  not  agree  as  to 
the  price  of  the  plant,  five  disinterested  non-residents  were 
to  be  appointed  as  appraisers  to  value  the  plant.  The  price 
so  ascertained  might  be  accepted  or  rejected  by  the  common 
council.  It  was  also  provided  that  the  company  should  not 
sell  its  plant  to  any  other  person  or  company  without  first 
giving  the  city  council  the  refusal  of  the  opportunity  to  pur¬ 
chase  at  the  same  price.  In  no  case,  however,  could  the 
works  be  bought  by  the  city  council  except  subject  to  ratifi¬ 
cation  by  a  majority  of  the  voters.  It  was  expressly  pro¬ 
vided  that  the  contract  should  not  be  construed  as  an  ex¬ 
clusive  privilege,  and  the  city  specifically  reserved  the  right 
to  construct  and  operate  water  works  for  itself,  or  to  charter 
another  company  for  the  purpose.  The  franchise  was  not  to 
go  into  effect  unless  accepted  by  the  company  within  30 
days  from  the  time  of  its  passage.  In  case  the  company  to 
which  the  grant  was  made  failed  to  accept  it  as  required,  any 
other  water  works  company  was  authorized  to  accept  the 
grant  after  the  expiration  of  60  days  from  February  3,  1870. 

By  an  ordinance  adopted  in  1884,  the  city  declared  it  un¬ 
lawful  for  any  person  to  change  or  alter  any  service  con¬ 
nected  with  the  company’s  water  mains  so  as  to  increase  or 
lessen  the  supply  of  water  furnished,  without  first  procuring 


WATER  SUPPLY  FRANCHISES. 


421 


the  company’s  written  consent.1  It  was  declared  unlawful 
for  the  owner  or  occupant  of  any  building  where  water  was 
being  supplied  by  the  company,  to  permit  any  person  not  an 
occupant  of  the  premises  to  use  the  water.  It  was  also  de¬ 
clared  unlawful  for  any  person  to  make  any  reconnection 
with  the  company’s  pipes  where  the  supply  of  water  had  been 
discontinued,  without  first  securing  the  company’s  consent. 

The  original  franchise  of  1870  is  still  in  force  except  as 
modified  by  the  contract  between  the  city  and  the  company. 
The  last  contract  was  entered  into  between  the  board  of  pub¬ 
lic  works  and  the  Indianapolis  Water  Company,  successor  of 
the  original  grantee,  on  November  4,  1908. 2  Under  this 
agreement  the  company  is  required  to  furnish  the  city  in  its 
corporate  capacity  pure  and  wholesome  water  sufficient  to 
supply  2,465  fire  hydrants  with  the  same  pressure  required 
under  the  terms  of  the  original  franchise.  This  pressure 
must  be  available  within  six  minutes  from  the  time  an  alarm 
of  fire  is  sounded.  The  company  also  agrees  to  supply  the 
city  with  water  for  71  drinking  fountains  and  for  a  display 
fountain  in  each  of  the  city’s  parks.  Water  is  also  to  be 
furnished  for  the  following  purposes,  up  to  the  quantities 
mentioned : 

For  each  engine  and  reel  house,  each  station  house  and  city  dispen¬ 
sary,  30,000  gallons  a  month. 

For  police  headquarters,  400,000  gallons  a  month. 

For  flushing  sewers  and  improved  streets  and  filling  public  cisterns 
within  reach  of  the  mains,  all  water  required. 

For  public  latrines  under  streets,  all  water  required. 

For  Tomlinson  Hall  and  market  house,  500,000  gallons  a  month. 

For  the  city  hospital,  600,000  gallons  a  month. 

For  public  baths,  100,000  gallons  a  day. 

For  barns  of  the  board  of  public  works,  100,000  gallons  a  month. 

For  city  buildings,  400,000  gallons  a  month. 

For  the  city  asphalt  or  repair  plant,  for  boiler  use,  and  for  the  city 
dog  pound,  as  much  as  may  be  required. 

For  sprinkling  lawns  and  roadways  in  parks,  5,000,000  gallons  a 
month. 

For  a  lily  pond  in  Riverside  Park,  sufficient  water  for  a  4-inch  pipe. 

The  city  agrees  to  pay  $45  a  year  for  each  fire  hydrant  and 
each  public  drinking  fountain  for  which  water  is  supplied 
by  the  company.  Water  for  all  other  public  uses,  to  the  ex¬ 
tent  just  described,  is  to  be  free.  Water  for  public  uses  in 

1  Laws  and  Ordinances,  op.  cit.,  p.  1193. 

1  For  the  text  of  this  contract,  see  Journal  of  Common  Council,  Indianapolis, 
Nov.  16,  1908,  p.  507. 


422 


MUNICIPAL  FRANCHISES. 


excess  of  the  quantities  mentioned,  is  to  be  paid  for  at  the 
rate  of  5  cents  per  thousand  gallons,  the  meters  to  be  fur¬ 
nished  by  the  company.  The  section  of  the  original  franchise 
requiring  the  company  to  make  extensions  as  ordered  by  the 
city,  is  modified  by  the  contract  so  that  the  city  may  not 
require  more  than  40,000  feet  of  new  mains  to  be  laid  in  any 
one  year,  and  the  city  agrees  to  locate  one  fire  hydrant  for 
each  500  feet  of  pipe  extension  made  by  the  company.  The 
company  is  authorized  to  employ,  at  its  own  expense,  a  com¬ 
petent  man  to  attend  fires  and  see  that  fire  hydrants  are 
properly  opened  and  that  no  water  is  used  from  any  fire  hy¬ 
drant  for  the  purpose  of  filling  cisterns  or  flushing  or  clean¬ 
ing  sewers  or  streets  during  the  progress  of  the  fire.  This 
man  is  subject  to  the  authority  of  the  chief  fire  engineer  or 
his  assistant  during  times  of  fire  and  is  required  to  report  to 
the  city  authorities  any  violations  of  the  provisions  of  the 
contract  or  of  the  orders  of  the  city  authorities  relative  to 
fire  hydrants. 

This  contract  took  effect  as  of  January  1,  1909,  and 
is  to  continue  for  a  period  of  ten  years.  At  the  expiration 
of  that  time,  if  the  city  is  unable  to  agree  with  the  company 
in  regard  to  rates  or  prices  for  public  water,  this  matter  is 
to  be  submitted  to  arbitration  under  the  terms  of  the  com¬ 
pany’s  original  franchise.  The  company  expressly  agrees  in 
this  contract  that  “  the  water  furnished  by  the  water  com¬ 
pany  to  the  city  and  citizens  of  Indianapolis  shall  be  good, 
potable  water”.  All  questions  in  regard  to  the  purity  of 
the  water  are  to  be  referred  to  two  bacteriological  chemists, 
one  selected  by  the  city  and  the  other  by  the  company.  In 
case  these  two  cannot  agree,  they  are  to  appoint  a  third 
chemist  as  umpire.  The  result  of  any  analysis  agreed  to  by 
two  of  these  chemists  is  to  be  accepted  as  conclusive  evidence 
of  the  degree  of  purity  of  the  water  supplied  by  the  company. 
The  expense  of  such  analysis  is  to  be  paid  by  the  city  and 
the  company  in  equal  portions. 

The  franchises  and  works  of  the  Indianapolis  Water  Com¬ 
pany  were  also  investigated  by  the  Special  Commission  of 
the  National  Civic  Federation  in  1907.  Professor  Gray, 
commenting  upon  the  character  of  the  water  supply  of 
Indianapolis,  stated  that  the  chief  difficulty  since  1905  had 
been,  not  with  the  company’s  charter  or  the  city’s  legal 


WATER  SUPPLY  FRANCHISES. 


423 


powers  of  control  or  the  existing  contract,  but  with  the  25,000 
polluted  surface  wells  still  in  use  in  the  city.1  He  stated 
that  the  board  of  health  had  officially  condemned  many  of 
these  wells  during  the  preceding  eight  years,  but  that  there 
was  no  evidence  of  the  condemned  wells  having  gone  out  of 
use.  The  city’s  legal  authority  to  compel  the  discontinuance 
of  the  use  of  wells  was  in  doubt.  An  investigating  committee 
which  reported  on  October  26,  1904,  stated  that  there  were 
only  8,833  customers  of  the  water  company  using  water  for 
water  closets,  while  the  total  number  of  families  in  the  city 
was  estimated  at  40,000,  and  the  number  of  private  wells  in 
use  was  placed  at  25,000,  as  already  stated. 

The  representatives  of  the  Civic  Federation  who  investi¬ 
gated  the  relations  of  water  works  to  labor  and  politics,  re¬ 
ported  that  the  Indianapolis  Water  Company  had  not  been 
prominent  in  political  affairs.  However,  they  state  that 
“  leading  members  of  the  council  get  free  water  unless  they 
decline,  and  others  less  prominent  get  free  service  on  re¬ 
quest  ”.2  They  also  report  that  the  company  does  not  employ 
in  its  office,  at  its  pumping  station,  or  as  a  street  foreman, 
any  man  who  drinks  intoxicating  liquor.  The  company  gives 
free  water  to  all  its  officers  and  staff  employes.  At  the  end 
of  each  year  the  company  sets  aside  a  certain  percentage  of 
its  net  earnings  for  distribution  among  its  regular  salaried 
employes.  The  investigators  state  that  “  there  has  been  no 
lawsuit  for  injuries  in  years;  settlement  out  of  court  is  the 
policy.” 

195.  A  city’s  franchise  from  the  Federal  government.— 
San  Francisco. — The  metropolis  of  the  Pacific  coast  is  the 
largest  American  city  which  still  depends  upon  a  private 
company  for  its  water  supply.  The  Spring  Valley  Water 
Company  inherits  from  its  predecessor,  the  Spring  Valley 
Water  Works,  a  state  charter  obtained  about  50  years  ago.3 

A  general  act  providing  for  the  incorporation  of  water 
companies  in  California,  passed  as  early  as  1858,  contained 
the  following  provision :  4 

**  All  corporations  formed  under  the  provisions  of  this  act  or  claiming 

1  National  Civic  Federation  Report,  1907,  op.  cit .,  Part  II,  Vol.  1,  pp.  10, 101. 

2  Ibid.,  p.  155. 

*  Reports  on  the  Water  Supplies  of  San  Francisco,  1900  to  1908,  published  by 
authority  of  the  Board  of  Supervisors,  p.  8. 

*  See  article  by  A.  S.  Baldwin,  “  Shall  San  Francisco  municipalize  its  water 
supply  ?  ”  published  in  Municipal  Affairs  for  June  1900,  Vol.  IV.  No.  2,  p.  817. 


424 


MUNICIPAL  FRANCHISES. 


any  of  the  privileges  of  the  same,  shall  furnish  pure,  fresh  water  to  the 
inhabitants  of  such  city  and  county,  or  city  or  town  for  family  uses,  so 
long  as  the  supply  permits,  at  reasonable  rates  and  without  distinction 
of  persons,  upon  proper  demand  therefor,  and  shall  furnish  water,  to 
the  extent  of  their  means,  to  such  city  and  county,  or  city  or  town,  in 
case  of  fire  or  other  great  necessity,  free  of  charge.” 

It  was  also  provided  by  this  act  that  the  rates  to  be  charged 
for  water  should  be  determined  by  a  board  of  commissioners. 
Two  commissioners  were  to  be  selected  by  the  local  authori¬ 
ties  and  two  by  the  water  company.  In  case  these  four  could 
not  agree  on  rates,  they  were  to  choose  a  fifth  commissioner 
to  act  with  them;  and  if  they  could  not  agree  upon  a  selec¬ 
tion,  the  fifth  commissioner  was  to  be  appointed  by  the  sheriff 
of  the  county.  Under  this  act,  also,  the  board  of  supervisors, 
or  the  proper  city  or  town  authorities,  were  authorized  to 
prescribe  other  proper  rules  relating  to  the  delivery  of  water, 
not  inconsistent  with  the  laws  or  constitution  of  the  state. 
It  should  be  noted  that  in  San  Francisco  the  city  council  is 
known  as  the  board  of  supervisors.  These  provisions  con¬ 
tinued  in  effect  until  modified  by  the  adoption  of  the  new 
state  constitution  in  1879.  In  that  instrument  the  following 
section  appeared : 1 

“  The  use  of  all  water  now  appropriated,  or  that  may  hereafter  be 
appropriated,  for  sale,  rental,  or  distribution,  is  hereby  declared  to  be  a 
public  use,  and  subject  to  the  regulation  and  control  of  the  state  in  the 
manner  to  be  prescribed  by  law  ;  provided,  that  the  rates  or  compensa¬ 
tion  to  be  collected  by  any  person,  company  or  corporation  in  this  state 
for  the  use  of  water  supplied  to  any  city  and  county,  or  city  or  town,  or 
the  inhabitants  thereof,  shall  be  fixed,  annually,  by  the  board  of  super¬ 
visors,  or  city  and  county,  or  city  or  town  council,  or  other  governing 
body  of  such  city  and  county,  or  city  or  town,  by  ordinance  or  other¬ 
wise,  in  the  manner  that  other  ordinances  or  legislative  acts  or  resolutions 
are  passed  by  such  body  and  shall  continue  in  force  for  one  year  and  no 
longer.  Such  ordinances  or  resolutions  shall  be  passed  in  the  month  of 
February  of  each  year,  and  take  effect  on  the  first  day  of  July  thereafter. 
Any  board  or  body  failing  to  pass  the  necessary  ordinances  or  resolutions 
fixing  water  rates,  where  necessary,  within  such  time,  shall  be  subject 
to  peremptory  process  to  compel  action  at  the  suit  of  any  party  inter¬ 
ested,  and  shall  be  liable  to  such  further  processes  and  penalties  as  the 
legislature  may  prescribe.  Any  person,  company  or  corporation  collect¬ 
ing  water  rates  in  any  city  and  county,  or  city  or  town  in  this  state, 
otherwise  than  as  so  established,  shall  forfeit  the  franchises  and  wTater 
works  of  such  person,  company  or  corporation  to  the  city  and  county, 
or  city  or  town  where  the  same  are  located,  for  the  public  use.” 

Another  section  of  the  constitution  provided  that  “the  right  to  collect 
rates  or  compensation  for  the  use  of  waters  supplied  to  any  county,  city 
aud  county,  or  town,  or  the  inhabitants  thereof,  is  a  franchise  and  cannot 

1  Article  XIV,  section  1, 


WATER  SUPPLY  FRANCHISES. 


425 

be  exercised  except  by  authority  of  and  in  the  manner  prescribed  by 
law  ”.1 

Still  another  section  provided  that  in  any  city  where  there  were  no 
waterworks,  “any  individual  or  any  company  duly  incorporated  for 
such  purpose  under  and  by  authority  of  the  laws  of  this  state,  shall, 
under  the  direction  of  the  superintendent  of  streets,  or  other  officer  in 
control  thereof,  and  under  such  general  regulations  as  the  municipality 
may  prescribe  for  damages  and  indemnity  for  damages,  have  the  privi¬ 
lege  of  using  the  public  streets  and  thoroughfares  thereof,  and  of  laying 
down  pipes  and  conduits  therein,  and  connections  therewith,  so  far  as 
may  be  necessary  for  introducing  into  and  supplying  such  city  and  its 
inhabitants  *  *  *  with  fresh  water  for  domestic  and  all  other  purposes, 
upon  the  condition  that  the  municipal  government  shall  have  the  right 
to  regulate  the  charges  thereof”.2 

The  general  laws  in  force  in  1907,  governing  water  and 
canal  corporations,  provide  that  no  water  company  may  sup¬ 
ply  a  city  unless  previously  authorized  by  municipal  ordi¬ 
nance  or  contract.3  No  city  may  contract  away  its  right  to 
regulate  rates,  and  no  exclusive  franchise  may  be  granted. 
No  contract  or  franchise  may  be  for  a  term  exceeding  50 
years.  All  water  companies  must  furnish  “  pure,  fresh 
water  ”. 

Subject  to  the  provisions  of  the  general  law  relative  to  the 
regulation  of  rates,  the  Spring  Valley  Water  Works  obtained 
a  monopoly  for  the  supply  of  water  to  San  Francisco  in  1865.4 
This  monopoly  has  been  maintained  to  the  present  time, 
limited  only  by  the  city’s  supervisory  and  regulatory  author¬ 
ity.  The  history  of  the  relations  between  the  city  and  the 
company  has  been  the  story  of  one  long  fight.  In  the  new 
city  charter  adopted  by  the  people,  which  went  into  effect 
January  8,  1900,  it  was  declared  "to  be  the  purpose  and  in¬ 
tention  of  the  people  of  the  city  and  county  that  its  public 
utilities  shall  be  gradually  acquired  and  ultimately  owned 
by  the  city  and  county  ”.5  The  board  of  supervisors  under 
the  new  charter  was  required  to  secure  at  least  every  two 
years,  through  the  city  engineer,  plans  and  estimates  of  the 
actual  cost  of  the  original  construction  and  completion  of 
water  works  by  the  city.  After  such  plans  and  estimates 
were  procured,  the  board  of  supervisors  was  required  to  enter 
into  negotiations  for  the  permanent  acquisition  by  the  city 
of  a  water  plant,  “  by  original  construction,  condemnation 

1  Article  XIV,  section  2. 

*  Article  XI,  section  19. 

*  Corporation  Laws  of  California,  1907,  p.  124. 

4  Reports  on  the  Water  Supplies,  etc.,  op.  cit .,  p.  3. 

0  Article  XII,  City  Charter. 


426 


MUNICIPAL  FRANCHISES. 


or  purchase  ”.  It  was  provided,  however,  that  before  any 
proposition  was  submitted  to  the  electors  for  their  approval, 
the  supervisors  must  solicit  and  consider  offers  for  the  sale 
to  the  city  of  the  existing  water  works,  in  order  that  the 
electors  should  have  the  benefit  of  acquiring  a  plant  at  the 
lowest  possible  cost.  These  provisions  of  the  charter  have 
been  amended  so  that  it  is  only  when  the  board  of  super¬ 
visors  by  ordinance  determines  that  the  public  interest  or 
necessity  demands  the  acquisition  of  any  public  utility,  or 
when  15  per  cent  of  the  electors  petition  for  such  acquisition, 
that  plans  and  estimates'  must  be  secured.1 

After  many  years  of  agitation  and  several  special  examina¬ 
tions  of  the  possible  sources  of  supply,  the  city  selected,  as 
the  most  available  source,  the  waters  of  the  Tuolumne  River, 
which  drains  an  area  of  about  1,500  square  miles  on  the 
western  slopes  of  the  Sierra  Nevada  mountains.  The  ad¬ 
vantages  claimed  for  this  source  are  the  absolute  purity  of 
the  water  on  account  of  the  uninhabitable  character  of  the 
watershed,  the  abundance  of  the  supply,  the  existence  of  the 
largest  and  most  numerous  sites  for  storage,  freedom  from 
complicating  water  rights,  and  great  possibilities  for  the 
development  of  power.  To  bring  this  water  to  the  city,  would 
require  conduits  aggregating  142  miles  in  length.  Two 
reservoir  sites  have  been  selected  by  the  city.  One  of  these 
is  Hetch  Hetchy,  where,  by  building  a  dam  150  feet  high,  a 
supply  of  135,000,000  gallons  a  day  could  be  developed.  The 
other,  Lake  Eleanor,  offers  the  possibility  of  developing  57,- 
000,000  gallons  a  day  for  seven  months  of  the  year. 

In  order  to  secure  the  right  to  build  these  reservoirs,  the 
sites  being  situated  within  the  Yosemite  reservation,  the 
city  was  compelled  to  file  applications  with  the  Department 
of  the  Interior  at  Washington.  These  applications  were  at 
first  denied,  in  1903,  on  the  ground  that  the  Secretary  of  the 
Interior  was  not  authorized  to  make  such  a  grant  under  the 
Federal  statutes.  With  much  difficulty  the  city  got  the  case 
reopened,  and  the  legal  question  regarding  the  Secretary’s 
authority  was  referred  to  the  Attorney  General.  The  Federal 
statute  upon  which  the  city  relied,  provides  that  “  the  Secre¬ 
tary  of  the  Interior  *  *  *  is  authorized  *  *  *  to 
permit  the  use  of  rights  of  way  through  *  *  *  the, 

1  As  amended  Dec.  4,  1902,  approved  by  the  Legislature,  Feb.  5, 1903. 


WATER  SUPPLY  FRANCHISES. 


427 


Yosemite,  Sequoia  and  General  Grant  national  parks.  Cali¬ 
fornia,  for  *  *  *  water  conduits  and  for  water  plants, 
dams,  and  reservoirs  used  to  promote  *  *  *  the  supply 
of  water  for  domestic,  public,  or  other  beneficial  uses,  *  *  * 
provided  that  such  permits  shall  be  allowed  within  or 
through  any  of  said  parks  *  *  *  only  upon  the  approval 

of  the  chief  officer  of  the  department,  under  whose  super¬ 
vision  such  park  or  reservation  falls,  and  upon  a  finding  by 
him  that  the  same  is  not  incompatible  with  the  public  in¬ 
terest  ”.1  The  Attorney  General  interpreted  this  statute  to 
vest  in  the  Secretary  of  the  Interior  a  discretionary  authority 
to  grant  or  refuse  applications  of  this  kind.  Thereafter 
Secretary  Garfield  took  the  matter  under  consideration  and, 
after  public  hearings  and  thorough  investigation,  approved 
the  city’s  applications.  In  the  course  of  his  decision  he  said : 2 

“I  appreciate  keenly  the  interest  of  the  public  in  preserving  the  nat¬ 
ural  wonders  of  the  park  and  am  unwilling  that  the  Hetch  Hetchy 
Valley  site  should  he  developed  until  the  needs  of  the  city  are  greater 
than  can  be  supplied  from  the  Lake  Eleanor  site  when  developed  to  its 
full  capacity.  Domestic  use,  however,  especially  for  a  municipal 
supply,  is  the  highest  use  to  which  water  and  available  storage  basins 
therefor  can  be  put.  Recognizing  this,  the  city  has  expressed  a  will¬ 
ingness  to  regard  the  public  interest  in  the  Hetch  Hetchy  Valley  and 
defer  its  use  as  long  as  possible. 

‘  ‘  The  next  great  use  of  water  and  water  resources  is  irrigation.  There 
are  in  the  San  Joaquin  Valley  two  large  irrigation  districts,  the  Turlock 
and  Modesto,  which  have  already  appropriated  under  state  law  2,350 
second  feet  of  the  normal  flow  of  water  through  Lake  Eleanor  and 
Hetch  Hetchy.  The  representatives  of  these  districts  protested  strongly 
against  the  granting  of  the  permit  to  San  Francisco,  being  fearful  that 
the  future  complete  development  of  these  irrigation  communities  would 
be  materially  hampered  by  the  city’s  use  of  water.  After  repeated  con¬ 
ferences,  however,  with  the  representatives  of  these  irrigation  districts 
I  believe  their  rights  can  be  fully  safeguarded,  provided  certain  definite 
stipulations  to  protect  the  irrigators  are  entered  into  by  the  city.  For¬ 
tunately,  the  city  can  agree  to  this,  and  the  interest  of  the  two  users 
will  not  conflict.  On  the  contrary,  the  city  in  developing  its  water 
supply  will  to  a  considerable  extent  help  the  irrigation  districts  in  their 
further  development. 

“The  only  other  source  of  objection,  except  that  from  persons  and 
corporations  who  have  no  rights  to  protect  but  merely  the  hope  of  finan¬ 
cial  gain  if  the  application  of  the  city  is  denied,  come  from  those  who 
have  a  special  interest  in  our  National  Parks  from  the  standpoint  of 
scenic  effects,  natural  wonders,  and  health  and  pleasure  resorts.  I  ap¬ 
preciate  fully  the  feeling  of  these  protestants  and  have  considered  their 
protests  and  arguments  with  great  interest  and  sympathy.  The  use  of 
these  sites  for  reservoir  purposes  would  interfere  with  the  present  con- 

1  Reports  on  the  Water  Supplies  of  San  Francisco,  op.  cit .,  p.  218. 

1  Ibid.,  p.  219. 


428 


MUNICIPAL  FRANCHISES. 


dition  of  the  park,  and  that  consideration  should  be  weighed  carefully 
against  the  great  use  which  the  city  can  make  of  the  permit.  I  am 
convinced,  however,  that  ‘  the  public  interest  ’  will  be  much  better  con¬ 
served  by  granting  the  permit.  Hetch  Hetcliy  Valley  is  great  and 
beautiful  in  its  natural  and  scenic  effects.  If  it  were  also  unique,  sen¬ 
timent  for  its  preservation  in  an  absolutely  natural  state  would  be  far 
greater.  In  the  mere  vicinity,  however,  much  more  accessible  to  the 
public  and  more  wonderful  and  beautiful,  is  the  Yosemite  Valley  itself. 
Furthermore,  the  reservoir  will  not  destroy  Hetch  Hetchy.  It  will 
scarcely  affect  the  canyon  walls.  It  will  not  reach  the  foot  of  the  vari¬ 
ous  falls  which  descend  from  the  sides  of  the  canyon.  The  prime  change 
will  be  that,  instead  of  a  beautiful  but  somewhat  unusable  ‘  meadow ' 
floor,  the  valley  will  be  a  lake  of  rare  beauty. 

“As  against  this  partial  loss  to  the  scenic  effect  of  the  park,  the  ad¬ 
vantages  to  the  public  from  the  change  are  many  and  great:  The  City 
of  San  Francisco  and  probably  the  other  cities  on  San  Francisco  Bay 
would  have  one  of  the  finest  and  purest  water  supplies  in  the  world; 
the  irrigable  land  in  the  Tuolumne  and  San  Joaquin  Valleys  would  be 
helped  out  by  the  use  of  the  excess  stored  water  and  by  using  the  elec¬ 
trical  power  not  needed  by  the  city  for  municipal  purposes,  to  pump 
subterranean  water  for  the  irrigation  of  additional  areas,  the  city  would 
have  a  cheap  and  bountiful  supply  of  electric  energy  for  pumping  its 
water  supply  and  lighting  the  city  and  its  municipal  buildings  ;  the 
public  would  have  a  highway  at  its  disposal  to  reach  this  beautiful  re¬ 
gion  of  the  park  heretofore  practically  inaccessible  ;  this  road  would  be 
built  and  maintained  by  the  city  without  expense  to  the  government  or 
the  general  public  ;  the  city  has  options  on  land  held  in  private  owner¬ 
ship  within  the  Yosemite  National  Park,  and  would  purchase  this  land 
and  make  it  available  to  the  public  for  camping  purposes  ;  the  settlers 
and  entrymen  who  acquired  this  land  naturally  chose  the  finest  localities, 
and  at  present  have  power  to  exclude  the  public  from  the  best  camping 
places ;  and  furthei  the  city  in  protecting  its  water  supply  would  fur¬ 
nish  to  the  public  a  patrol  to  save  this  part  of  the  park  from  destructive 
and  disfiguring  forest  fires. 

“The  floor  of  the  Hetch  Hetchy  Valley,  part  of  which  is  owned  pri¬ 
vately  and  used  as  a  cattle  ranch,  would  become  a  lake  bordered  by 
vertical  granite  walls  or  steep  banks  of  broken  granite.  Therefore, 
when  the  water  is  drawn  very  low  it  will  leave  few  muddy  edges  ex¬ 
posed.  This  lake,  however,  would  be  practically  full  during  the 
greater  part  of  the  tourist  season  in  each  year,  and  there  would  be 
practically  no  difficulty  in  making  trails  and  roads  for  the  use  of  the 
tourists  around  the  edges  of  the  valley  above  high  water  mark.” 

The  Secretary’s  approval  of  the  city’s  application  for  these 
water  rights  was  granted  upon  certain  conditions  contained 
in  a  stipulation  filed  by  the  city  with  the  Department.  This 
stipulation  practically  covers  the  franchise  conditions  im¬ 
posed  by  the  general  government  upon  its  grantee,  the  City 
of  San  Francisco.  These  conditions  may  be  summarized  as 
follows : 1 

(i)  it  is  stated  that  the  city  owns  practically  all  the 

1  Reports  on  Water  Supplies  of  San  Francisco,  op.  cit.,  p.  220. 


WATER  SUPPLY  FRANCHISES. 


429 


patented  land  in  the  floor  of  the  Hetch  Hetchy  reservoir  site 
and  sufficient  adjacent  areas  in  the  Yosemite  Park  and  the 
Sierra  National  Forest  to  equal  the  remainder  of  the  reservoir 
area.  The  city  agrees  to  surrender  to  the  United  States 
equivalent  areas  outside  of  the  reservoir  sites  and  within  the 
national  park  and  adjacent  to  the  reservoirs,  in  exchange  for 
the  remaining  land  in  the  reservoir  sites.  It  is  proposed  to 
secure  authority  from  Congress  for  this  exchange  if  necessary. 

(2)  The  city  agrees  that  the  regulations  imposed  for  the 
government  of  the  park  shall  be  applicable  to  its  holdings 
within  the  park,  and  that  it  will  throw  open  to  the  public 
the  use  of  its  holdings  under  regulations  fixed  by  the  Depart¬ 
ment  of  the  Interior,  except  to  the  extent  that  the  necessary 
use  of  its  holdings  for  the  exclusive  purpose  of  storing  and 
protecting  water  would  be  interfered  with. 

(3)  The  city  agrees  to  develop  the  Lake  Eleanor  site  to 
its  full  capacity  before  beginning  the  development  of  the 
Hetch  Hetchy  site.  The  latter  is  to  be  undertaken  only  when 
the  needs  of  San  Francisco  and  the  adjacent  cities  which  may 
join  with  it  in  obtaining  a  common  water  supply,  shall  re¬ 
quire  such  development. 

(4)  San  Francisco  and  other  cities  joining  it  in  obtaining 
a  common  water  supply,  will  not  interfere  in  the  slightest 
particular  with  the  right  of  the  two  irrigation  districts  sit¬ 
uated  in  the  San  Joaquin  Valley  to  use  the  natural  flow  of 
the  Tuolumne  Eiver  to  the  full  extent  of  their  claims.  San 
Francisco  will  stipulate  not  to  store  or  divert  any  of  the 
natural  flow  of  the  river  when  desired  by  these  irrigation 
districts  for  any  beneficial  purpose,  unless  such  actual  flow 
should  be  in  excess  of  the  capacities  of  the  canals  owned  by 
the  districts. 

(5)  The  city  agrees  not  to  interfere  in  any  way  with  the 
storage  of  flood  waters  by  the  irrigation  districts  at  sites 
other  than  the  two  selected  for  city  use,  and  also  agrees  to 
return  to  the  river  for  the  use  of  the  districts  all  surplus  or 
waste  flow  used  for  power. 

(6)  The  city  agrees  to  sell  to  the  irrigation  districts,  upon 
request,  for  the  use  of  land  owners  within  their  limits,  any 
excess  of  electric  power  generated  by  the  water  works  and 
not  used  for  the  municipal  purposes  of  the  city.  The  price 
to  be  charged  is  to  be  such  as  will  reimburse  the  city  for 


430 


MUNICIPAL  FRANCHISES. 


developing  and  transmitting  surplus  energy.  In  case  of  dis¬ 
pute  the  price  is  to  be  fixed  by  the  Secretary  of  the  Interior. 

(7)  The  city  agrees  that  the  Secretary  may  at  his  discretion 
or  when  called  upon  by  the  city  or  by  the  irrigation  districts 
to  do  so,  direct  the  apportionment  and  measurement  of  the 
water  in  accordance  with  the  terms  of  this  stipulation. 

(8)  The  city  agrees  that  when  it  begins  the  development 
of  the  Hetch  Hetchy  site,  it  will  vigorously  prosecute  the 
completion  of  a  dam  to  the  height  of  at  least  150  feet,  with 
a  foundation  capable  of  supporting  the  dam  when  built  to 
its  greatest  economic  and  safe  height.  It  is  also  agreed  that 
whenever  in  the  opinion  of  the  engineer  in  charge  of  the 
reservoirs  the  volume  of  water  in  storage  is  in  excess  of  the 
seasonal  requirements  of  the  city  and  other  municipalities 
interested,  such  excess  shall  be  liberated  under  the  directions 
and  for  the  use  of  the  irrigation  districts  at  a  price  not  to 
exceed  the  proportionate  cost  of  storage  plus  a  sinking  fund 
chargeable  to  the  volumes  of  water  thus  liberated.  Under 
this  provision  also  the  price,  in  case  of  dispute,  is  to  be  fixed 
by  the  Secretary  of  the  Interior. 

(9)  The  city  agrees,  within  two  years  after  the  Secretary’s 
approval  of  its  applications,  to  submit  the  question  of  adopt¬ 
ing  this  source  of  water  supply  to  a  vote  of  the  people  of  San 
Francisco,  as  required  by  the  city  charter,  and  within  three 
years  thereafter,  if  the  vote  is  favorable,  to  commence  the 
actual  construction  of  the  Lake  Eleanor  dam  and  carry  it 
forward  to  completion  with  all  reasonable  diligence,  so  that 
it  will  be  finished  within  five  years  after  the  time  of  com¬ 
mencing  work,  unless  the  period  specified  should  be  extended 
by  the  Secretary  of  the  Interior  for  cause,  or  the  construc¬ 
tion  work  should  be  delayed  by  litigation. 

The  plan  was  submitted  to  the  people  of  San  Francisco,  as 
required  by  this  stipulation,  and  approved  by  them  by  an 
overwhelming  vote.  The  city  then  caused  to  be  introduced 
into  Congress,  at  the  session  of  1908-09,  resolutions  author¬ 
izing  the  desired  exchange  of  lands.  These  resolutions  were 
considered  by  committees  of  the  Senate  and  the  House,  but 
no  final  action  was  taken  on  them.  Great  opposition  de¬ 
veloped  from  the  Spring  Valiev  Water  Company  and  also 
from  certain  important  civic  bodies,  who  opposed  the  plan  on 
the  ground  that  it  involved  an  encroachment  upon  the  nat- 


WATER  SUPPLY  FRANCPIISES. 


431 


ural  beauty  of  the  Yosemite.  The  great  advantage  of  the 
plan,  from  the  standpoint  of  San  Francisco,  is  that  the  city 
would  be  able  to  secure  reservoir  sites  and  an  abundant 
supply  of  water  practically  without  cost.  It  is  a  well  known 
fact  that  for  several  decades  the  available  water  rights  in  the 
vicinity  of  San  Francisco  have  been  systematically  seized  by 
the  Spring  Valley  Water  Company  and  other  private  in¬ 
terests,  with  the  idea  of  forcing  the  city  to  pay  heavily  in  case 
it  undertakes  municipal  ownership  of  the  water  works.  In 
any  case,  even  if  it  secures  this  enormously  valuable  fran¬ 
chise  as  a  free  gift  from  the  United  States  government,  the 
city  will  have  to  invest  many  millions  of  dollars  in  the  con¬ 
struction  of  reservoirs  and  conduits  and  the  purchase  or  con¬ 
struction  of  a  distributing  system. 

196.  A  project  too  vast  for  private  enterprise  —  Los 
Angeles. — The  City  of  Los  Angeles,  organized  in  1850  under 
American  law,  inherits  certain  water  rights  from  the  old 
Spanish  pueblo.1  As  a  result  of  considerable  litigation  as  to 
the  extent  of  these  rights,  the  Supreme  Court  of  California 
imposed  certain  limits  upon  the  city’s  claims. 

“It  is  held,”  says  the  first  report  of  the  hoard  of  water  commis¬ 
sioners,  “  that  the  city  lias  the  paramount  right  to  so  much  of  the  water 
•  flowing  in  the  river,  at  any  point  from  its  source  or  sources  to  the 
southern  boundary  of  the  city,  as  it  may  require  for  municipal  uses  and 
for  the  use  of  its  inhabitants :  that  this  right  inheres  not  only  in  the 
surface  stream  but  in  the  stream  as  it  flows  below  the  surface,  and  in 
all  subterranean  waters  which  supply  the  surface  or  underground 
stream ;  that  this  right  is  not  limited  to  the  territory  covered  by  the 
original  pueblo,  but  attaches  to  all  additional  territory  from  time  to 
time  brought  within  the  city  limits;  nor  is  this  right  limited  to  the 
original  uses  of  the  pueblo  and  its  inhabitants,  which  were  practically 
confined  to  absolute  necessities,  but  expands  so  as  to  take  in  all  uses, 
individual  and  municipal,  naturally  arising  from  the  growth  of  the  city 
and  from  the  demands  of  an  ever  advancing  civilization.  ” 

In  the  early  days  the  city’s  water  rights  were  used  prin¬ 
cipally  for  irrigation.  The  domestic  supply  was  secured 
largely  from  the  irrigating  ditches.  By  1868  a  crude  system 
had  been  developed,  consisting  of  two  miles  of  wooden  and 
one  mile  of  iron  pipes,  which  had  been  laid  by  the  city.  In 
that  year  the  city  transferred  its  plant  to  certain  individuals 
under  a  contract  or  lease  which  was  in  effect  a  water 
franchise. 

1  See  Report  of  Board  of  Water  Commissioners  of  Los  Angeles  for  the  year 
ending  November  80,  1902. 


432 


MUNICIPAL  FRANCHISES. 


By  the  terms  of  this  grant  the  city  was  to  receive  an  annual 
rental  of  $1,500  for  the  works  and  the  grantees  were  to  can¬ 
cel  all  prior  claims  held  by  them  against  the  city  for  repairs 
and  damages  amounting  to  about  $8,000.1  They  agreed 
furthermore  to  lay  twelve  miles  of  iron  pipes  of  sufficient 
capacity  to  supply  the  inhabitants  of  the  city  with  water  for 
domestic  purposes  and  to  erect  one  tire  hydrant  at  the  cor¬ 
ner  of  each  cross  street  along  the  lines  of  the  water  mains. 
They  also  agreed  to  erect  an  ornamental  fountain  in  the 
public  plaza  at  a  maximum  cost  of  $1000.  They  were  to  have 
the  water  works  completed  within  one  year  so  as  to  secure  to 
the  inhabitants  of  the  city  a  constant  supply. 

In  this  lease  reference  is  made  to  a  prior  lease  dated  Oct. 
16,  1865,  and  all  the  rights  and  privileges  included  in  the 
former  lease  were  confirmed  to  the  present  grantees.  These 
included  the  right  to  sell  and  distribute  w'ater  for  domestic 
purposes  and  to  receive  rents  and  profits  from  the  operation 
of  the  water  works.  The  grantees  were  given  the  specific 
right  to  lay  pipes  in  any  and  all  the  streets  of  the  city,  and 
to  dig  and  make  all  necessary  excavations  for  that  purpose, 
with  the  additional  right  to  take  water  from  the  Los  Angeles 
River.  The  amount  of  water  to  be  taken  from  the  river, 
however,  was  not  to  exceed  “  ten  inches  ”,  unless  with  the 
previous  consent  of  the  mayor  and  common  council.  The 
city  agreed  that  at  the  expiration  of  the  period  of  thirty 
years  it  would  pay  the  grantees  or  their  successors  “  the 
value  of  the  improvements  made  in,  about,  and  upon  the 
said  water  works,  in  pursuance  of  this  contract;  the  same  to 
be  ascertained  by  arbitration,  in  case  the  parties  cannot  agree 
upon  the  value  thereof  The  city  agreed  “  to  make  no  other 
lease,  sale,  contract,  grant  or  franchise  to  any  person  or  per¬ 
sons,  corporation  or  company,  for  the  sale  or  delivery  of  water 
to  the  inhabitants  of  said  city  for  domestic  purposes  during 
the  continuance  of  this  contract 99 .  The  grantees,  on  the  other 
hand,  agreed  that  within  one  year  from  the  date  of  the  con¬ 
tract  they  would  replace  all  the  wooden  pipes  then  belonging 
to  the  water  works  system  and  that  they  would  extend  the 
iron  pipes  “  as  fast  as  the  citizens,  desiring  to  be  supplied 
with  water  for  domestic  purposes,  will  agree  to  take  sufficient 

1  See  “A  contract,  for  the  Leasing  of  the  Loq  Angeles  City  Water  Works.” 
typewritten  copv  furnished  by  William  Mulholland,  Superintendent  for  the  Board 
of  Water  Commissioners. 


W ATER  SUPPLY  FRANCHISES. 


433 


water  to  pay  ten  per  cent  per  annum  interest  upon  the  cost 
of  extending  such  pipes  through  the  streets  now  unsupplied 
with  water”.  They  also  agreed  to  furnish  water  for  the 
public  schools,  city  hospitals  and  jails  free  of  charge  when 
these  buildings  were  near  the  water  mains.  The  city,  how¬ 
ever,  was  to  furnish  the  necessary  conduits  for  making  the 
connections.  The  grantees  also  agreed  to  make  improve¬ 
ments  at  their  own  expense  and  keep  them  in  repair  through¬ 
out  the  period  of  the  grant,  and  to  return  the  water  works  to 
the  city  at  the  expiration  of  the  thirty-year  period  “  in  good 
order  and  condition,  reasonable  wear  and  the  damage  of  the  * 
elements  excepted  ”  upon  the  city’s  paying  for  the  improve¬ 
ments.  A  bond  of  $25,000  was  to  be  executed  by  the  grantees 
and  they  were  to  pay  all  state  and  county  taxes  assessed 
against  the  water  works  during  the  period  of  the  grant.  The 
mayor  and  common  council,  however,  reserved  the  right  to 
regulate  water  rates,  but  it  was  stipulated  that  they  should 
“  not  so  reduce  such  water  rates,  or  so  fix  the  price  thereof, 
to  be  less  than  those  now  charged  ”.  The  original  lease  of 
1865  was  to  be  surrendered  and  cancelled.  It  was  expressly 
provided  that  the  grant  did  not  “  embrace,  to  any  extent,  or 
have  any  reference  to,  the  water  works  of  said  city  used  for 
the  distribution  of  water  for  the  purposes  of  irrigation,  or 
affect  in  any  manner  any  rights  of  irrigation,  either  existing 
at  present,  or  which  may  exist  hereafter,  except  as  to  the  ten 
inches  of  water  as  hereinbefore  provided  ”.  It  was  ex¬ 

pressly  stipulated  that  the  grantees  should  not  furnish  water 
for  irrigation  purposes  and  should  take  from  the  river  only 
such  amount  as  was  necessary  for  domestic  uses. 

Soon  after  this  contract  was  entered  into,  the  grantees 
organized  the  Los  Angeles  City  Water  Company,  and  in  1870 
the  legislature  ratified  the  contract  with  the  city.1  In  1879, 
as  already  stated  in  the  preceding  section,  California  adopted 
a  new  constitution,  which  provided  that  municipalities  should 
have  the  right  to  regulate  the  water  rates  charged  by 
private  companies.  In  attempting  to  exercise  this  constitu- 
tonal  right,  the  city  overstepped  the  limitations  of  the  original 
contract,  which  provided  that  the  rates  should  not  be  reduced 
below  those  in  force  in  1868.  This  action  of  the  city  resulted 
in  long-drawn-out  litigation.  In  the  mean  time,  when  the 

1  See  Engineering  Record,  June  9,  1900,  Vol.  41,  p.  588. 


434 


MUNICIPAL  FRANCHISES. 


contract  expired  in  1898,  the  city  and  the  company  were 
unable  to  agree  as  to  the  value  of  the  “  improvements  ”  which 
the  company  had  made  to  the  original  plant.  The  length 
of  mains  had  been  increased  from  3  to  325  miles.  Appraisers 
were  appointed,  and  they  in  turn  secured  the  assistance  of  a 
board  of  four  engineers.  The  latter  in  1899  valued  the  com¬ 
pany’s  physical  property  at  $995,3894  In  arriving  at  this 
figure,  the  engineers  had  deducted  for  depreciation  29.31  per 
cent  from  the  estimated  cost  of  reproduction ;  had  then  added 
10  per  cent  for  engineering,  supervision  and  contingencies; 
had  then  added  6  per  cent  for  contractors’  profits,  and  had 
finally  added  4  per  cent  to  the  total  thus  secured.  The 
appraisers  themselves,  however,  valued  the  company’s  works 
at  $1,183,591.  The  price  finally  paid  by  the  city  in  1902 
was  an  even  $2,000,000. 

Los  Angeles  has  great  expectations;  its  inhabitants  firmly 
believe  that  it  is  to  be  one  of  the  great  cities  of  the  country 
in  the  not  far  distant  future.  The  population  of  the  city 
in  1900  was  102,479.  By  1903  it  claimed  a  population  of 
200,000.  The  Bureau  of  the  Census  brings  out  a  special  re¬ 
port  each  year,  giving  statistics  of  cities.  In  estimating  the 
increase  of  population  from  year  to  year,  the  Bureau’s  experts 
have  worked  out  certain  rules  based  upon  growth  of  popula¬ 
tion  shown  by  previous  state  and  Federal  censuses.  In  the 
population  table  the  space  after  Los  Angeles  is  left  blank  for 
each  year  succeeding  the  year  of  the  last  Federal  census.  In 
explaining  this  omission,  the  census  report  says : 2 

“  In  the  case  of  Los  Angeles,  California,  the  available  information 
indicates  a  rate  of  increase  in  population  much  greater  than  would  be 
shown  by  the  application  of  the  rules  above  set  forth,  and  in  accordance 
with  the  request  of  the  city  officials  no  estimate  is  given.” 

In  casting  about  for  a  water  supply  equal  to  the  prospects 
of  the  city,  the  Los  Angeles  Board  of  Water  Commissioners 
fixed  upon  the  Owens  River  Valley,  which  is  230  miles  dis¬ 
tant  in  the  mountains.  In  September,  1905,  the  people  voted 
almost  unanimously  to  authorize  the  issue  of  $1,500,000  of 
bonds  to  pay  the  preliminary  expenses  of  the  gigantic  task 
of  bringing  water  from  this  source.3  In  1907,  by  a  vote  of 

1  Reo  Engineering  News ,  May  4,  1899,  Vol.  41,  p.  283. 

3  Bureau  of  the  Census,  Special  Reports,  “Statistics  of  Cities  having  a  Popula¬ 
tion  of  over  30,000,  1905."  p.  45. 

8  See  “  The  Los  Angeles  Aqueduct,"  by  Burt  A.  Heinly,  published  in  The  Earth, 
September,  1908. 


WATER  SUPPLY  FRANCHISES. 


435 


ten  to  one,  the  people  authorized  a  further  issue  of  $23,000,000 
of  bonds  to  carry  the  enterprise  to  a  successful  conclusion. 
It  is  claimed  that  the  Owens  River  project  will  provide  a 
domestic  water  supply  of  259,000,000  gallons  a  day,  adequate 
for  2,000,000  people;  that  it  will  provide  irrigation  for 
75,000  acres  of  now  unproductive  land  adjoining  the  city, 
and  that  it  will  furnish  the  means  of  ultimately  developing 
75,000  horse-power  of  electrical  energy. 

This  great  enterprise  is  one  of  the  most  daring  ever  under¬ 
taken  by  a  city.  It  involves  the  construction  of  an  aqueduct 
for  a  distance  of  130  miles  across  the  desert,  where  prior  to 
the  commencement  of  operations  there  had  been  no  transporta¬ 
tion  facilities  other  than  the  stage-coach.  It  involves  also 
tunneling  a  distance  of  nearly  27,000  feet  through  the  crest 
of  the  Coast  Range.  It  is  estimated  that  it  will  take  1,680 
days,  working  from  both  ends,  to  complete  this  tunnel. 
Actual  construction  was  commenced  in  October,  1907.  In 
its  preparation  for  the  prosecution  of  its  great  work,  the  city 
found  it  necessary  to  secure  the  construction  of  a  railroad 
130  miles  long,  for  the  purpose  of  handling  the  thousands 
of  men  and  the  millions  of  tons  of  freight  necessary  in  the 
construction  of  the  aqueduct;  to  develop  a  temporary  supply 
of  water  along  the  entire  line  of  the  aqueduct  for  domestic 
and  building  purposes  and  as  a  cheap  source  of  power  in 
tunneling  and  excavating;  to  provide  a  telephone  system 
196  miles  in  length  for  the  purpose  of  convenience  in  com¬ 
munication  and  administrative  control;  to  construct  155  miles 
of  roads  and  trails,  costing  all  the  way  from  $16  a  mile  to 
$1  per  lineal  foot;  to  construct  and  equip  hydro-electric 
power  plants  and  provide  for  transmitting  energy  35  miles 
in  one  direction  and  90  miles  in  the  other;  to  establish  a 
cement  plant  at  a  cost  of  $400,000  and  to  provide  buildings 
for  housing  thousands  of  men  employed  upon  the  work. 

The  present  domestic  consumption  of  water  in  Los  Angeles 
ranges  from  35,000,000  to  44,000,000  gallons  daily.  The 
area  of  the  city  is  about  forty  square  miles.  It  is  said: 1 

“  The  aqueduct  will  be  capable  of  giving  an  inexhaustible  supply  of 
water  for  the  domestic  use  of  Los  Angeles.  The  city’s  present  limits, 
prevented  by  the  present  supply  from  any  further  extensions,  can  be 
made  to  stretch  from  the  mountains  to  the  sea.  Such  towns  and 
villages  as  may  be  determined  by  the  vote  of  the  whole  people,  can  be 
included  within  the  confines  of  a  newer,  greater  city.” 

1  Los  Angeles  Examiner,  anniversary  edition,  1908. 


436 


MUNICIPAL  FRANCHISES. 


If  the  resumption  of  the  water  franchise  by  the  munici¬ 
pality  has  within  less  than  a  decade  resulted  in  such  an  ex¬ 
pansion  of  civic  hope  and  patriotism  in  Los  Angeles,  we  may 
easily  believe  that  the  assumption  of  public  control  of  utilities 
now  held  as  private  monopolies,  gives  promise  of  being  a 
most  important  means  for  developing  that  civic  pride  and 
co-operative  spirit  which  alone  can  insure  good  government 
in  a  great  city. 

197.  A  franchise  forfeited  for  abuse  of  privileges— New 
Orleans. — The  City  of  New  Orleans  presents  us  with  one  of 
the  extremely  rare  cases  in  which  a  private  company’s  fran¬ 
chise  for  furnishing  a  great  public  utility  has  been  actually 
and  absolutely  forfeited  by  judicial  determination  long  before 
the  expiration  of  the  period  named  in  the  franchise.  The 
city  has  an  exceptional  location.  Lying  on  both  sides  of  the 
Mississippi  Eiver  about  100  miles  from  the  Gulf  of  Mexico, 
its  site  is  from  six  to  twenty  feet  below  the  high  water  level 
of  the  river  and  averages  about  even  with  the  level  of  Lake 
Pontchartrain,  which  lies  to  the  north.  The  original  water 
works  system  was  built  by  a  private  company  which  com¬ 
menced  operations  about  1836  and  had  gradually  extended  its 
plant  until  in  1868  it  had  mains  in  65  miles  of  streets.  At 
that  time  the  city  purchased  the  plant.  “  Private  ownership 
had  been  bad,”  says  Mr.  George  G.  Earl,  general  superintend¬ 
ent  of  the  sewerage  and  water  board,  <c  but  in  this  case  public 
ownership  proved  worse  ”.1 

In  i877  a  private  company  was  organized  to  take  over  the 
water  works  and  was  given  a  fifty-year  exclusive  franchise. 
Another  citizen  of  New  Orleans  explains  the  reason  for  giv¬ 
ing  up  municipal  ownership  and  the  consequences  of  the 
change  as  follows : 2 

“The  disastrous  results  of  the  Civil  War  and  the  tenfold  more 
disastrous  afflictions  of  the  reconstruction  period,  so  exhausted  the 
city’s  ability  to  make  needed  repairs  and  improvements  to  its  municipal 
utilities,  that  in  order  to  have  the  system  kept  going,  in  1877  the  water 
system  was  transferred  to  a  private  corporation  with  a  fifty-year  mono¬ 
poly  right.  The  corporation  took  charge  of  a  system  of  some  60  miles 
of  pipes  and  from  the  very  start  adopted  a  system  of  ‘  get-all-you-can  ’ 
out  of  its  franchise,  instead  of  a  wide  extension  of  facilities.  When 
its  charter  was  forfeited,  after  30  years  of  profitable  operation,  its  pipe 

1  See  Proceedings  of  the  13tli  annual  convention  of  the  American  Society  of 
Municipal  Improvements,  1906,  pp.  109-123. 

a  Annals  of  the  American  Academy  of  Political  and  Social  Science,  November, 
1907,  Vol.  30,  p.  152. 


WATER  SUPPLY  FRANCHISES. 


437 


mileage  had  increased  only  70  miles,  and  it  was  still  supplying  the  raw, 
muddy  water  of  the  Mississippi  River,  without  filtration  or  even 
settling.  The  supply  was  totally  inadequate  to  the  needs  of  the 
population.  The  charges  to  the  consumers  were  grossly  extortionate, 
and  discriminative,  some  consumers  paying  one-half  what  others,  less 
favored,  had  to  pay  for  similar  service.  Water  meters  were  not  allowed 
unless  to  large  consumers,  and  then  the  meter  had  to  be  installed  at  the 
consumer’s  cost ;  but  the  meter  measurement  was  a  farce,  because,  as 
was  shown  on  the  trial  for  the  forfeiture  of  the  company’s  charter,  the 
meter  registered  in  cubic  feet,  and  to  one  consumer,  the  company  would 
bill  the  supply  at  eight  gallons  per  cubic  foot,  to  another  at  ten  gallons, 
and  to  some  unfortunates  at  twelve  gallons  per  foot.  The  city  had  no 
control  whatever  over  the  charges,  or  the  accounts,  of  the  company. 
True,  a  minority  of  the  board  of  directors  was  composed  of  city 
officials,  but  in  practice  these  city  members  were  ignored,  or  else 
neglected  their  duties.  In  fact,  the  water  supply  for  this  great  city,  on 
the  banks  of  a  great  river,  with  an  inexhaustible  supply  of  good  water, 
was  grossly  inadequate.” 

The  original  franchise  of  the  New  Orleans  Water  Works 
Company  was  derived  from  a  special  act  of  the  Legislature  of 
Louisiana  passed  at  an  extra  session  in  1877.1  By  the  terms 
of  this  franchise,  or  charter,  the  amount  of  the  company’s 
capital  stock  was  fixed  at  $2,000,000,  of  which  a  little  over 
$600,000  was  to  be  assigned  to  the  city  as  full  paid  and  not 
subject  to  assessment.  The  Mayor,  the  Administrator  of 
Water  Works  and  Public  Buildings  and  the  Administrator  of 
Finance  were  to  be  ex-officio  directors  of  the  company.  There 
,  were  to  be  four  other  directors  originally  chosen  by  all  the 
stockholders,  including  the  city.  By  an  amending  act  of  1878, 
however,  the  city’s  power  to  vote  as  a  stockholder  in  the  elec¬ 
tion  of  the  majority  directors  was  taken  away.2  The  com¬ 
pany  was  authorized  to  issue  bonds  to  the  amount  of  $2,000,- 
000.  It  was  forbidden  to  declare  or  pay  any  dividends  except 
in  cash  and  then  only  out  of  the  net  semi-annual  or  annual 
receipts  after  payment  of  the  expenses  of  operation  and  the 
interest  on  the  bonded  debt.  This  provision  was  changed  by 
the  amendment  of  1878  so  that  dividends  could  not  be  paid 
except  after  provision  had  been  made  out  of  current  receipts 
for  “  gradual  extension  ”  as  well  as  operating  expenses  and 
interest.  The  city  was  permitted  to  use  water  from  the  com¬ 
pany’s  pipes  and  fire-plugs  free  of  charge  for  the  extinguish¬ 
ment  of  fires,  for  the  cleansing  of  the  streets  and  for  the  use 
of  all  public  buildings,  public  markets  and  charitable  institu¬ 
tions.  In  consideration  of  the  free  water  furnished  to  the 

1  Laws  of  the  State  of  Louisiana,  extra  session  of  1877,  No.  33. 

3  Laws  of  the  State  of  Louisiana,  1878,  No.  43. 


438 


MUNICIPAL.  FRANCHISES. 


city,  the  franchises  and  property  of  the  company  were  de¬ 
clared  to  be  “  exempt  from  taxation — State,  municipal  and 
parochial  ”.  By  the  amendment  of  1878,  however,  the  word 
“  State  ”  was  stricken  out  of  this  clause.  The  company  was 
authorized  to  lay  pipes  and  construct  hydrants  in  the  streets 
and  public  places  of  the  city  and  its  suburbs  on  condition 
that  it  should  restore  the  streets  to  their  former  state  under 
the  supervision  of  the  City  Surveyor.  The  company  was 
given  the  right  to  expropriate  land  anywhere  in  the  State  of 
Louisiana  for  any  necessary  purpose  in  connection  with  the 
supply  of  water  to  the  city  of  New  Orleans.  The  company 
was  required,  immediately  after  its  organization,  to  proceed 
“  to  the  erection  of  new  works  and  pipes  sufficient  in  capacity 
to  furnish  a  full  and  adequate  supply  of  water,  to  be  drawn 
from  the  Mississippi  River,  or  elsewhere,  as  may  be  judged 
most  expedient”.  The  new  works  were  to  be  commenced 
within  twelve  months  and  completed  within  five  years.  In 
case  the  company  failed  to  do  the  work  as  prescribed  it  was 
to  forfeit  its  exclusive  privilege,  and  the  city  was  to  have 
the  right  to  contract  with  anyone  else  for  the  supply  of  water 
and  to  expropriate  the  company’s  property.  It  was  provided 
that  “  after  the  completion  of  the  new  works  and  pipes,  the 
said  company  shall,  from  time  to  time,  as  the  wants  of  the 
population  may  require,  and  when  the  estimated  revenue  on 
the  cost  of  such  extension  shall  equal  ten  per  centum,  extend 
their  works  throughout  the  entire  limits  of  the  city  and 
suburbs,  and  any  future  extension  of  said  city  ”.  Failure 
to  comply  with  this  provision  was  to  work  the  forfeiture  of 
the  company’s  charter.  The  company  was  authorized  to  fix 
the  water  rates,  on  condition  that  its  net  profits  should  not 
exceed  10%  per  annum.  Sworn  annual  statements  of  the 
company’s  business  and  condition  were  to  be  published,  and 
the  city  council  was  to  have  authority  to  appoint  a  committee 
to  examine  the  company’s  books  and  to  “  make  such  extracts 
from  the  same  as  they  may  deem  necessary  ”.  In  case  the 
company’s  profits  should  be  found  to  exceed  10%,  the  council 
could  require  a  reduction  in  the  price  of  water  sufficient  to 
bring  the  profits  down  to  the  10%  limit.  It  was  provided 
that  in  no  case  should  the  rates  charged  ever  exceed  the  rates 
being  paid  at  the  time  this  franchise  was  granted.  Any 
person  who  should  obstruct  the  company  in  conveying  its 


WATER  SUPPLY  FRANCHISES. 


439 


water  or  should  interfere  with  any  part  of  the  company’s 
work  under  this  franchise  or  should  change  or  pollute  the 
company’s  water  supply,  was  to  be  fined  at  the  discretion  of 
the  Court,  and  imprisoned  for  a  term  not  exceeding  seven 
years.  Fines  paid  under  this  provision  were  to  be  applied  to 
the  use  of  the  company.  It  was  provided  that  at  the  end  of 
fifty  years  the  city  should  have  the  right  to  buy  the  works, 
conduits,  pipes,  etc.,  of  the  company  at  a  valuation  to  be 
fixed  by  five  experts.  In  case  the  city  refused  to  purchase, 
however,  the  company’s  charter  was  to  be  extended,  ipso  facto, 
for  fifty  years  longer,  but  without  any  exclusive  privilege. 

After  a  few  years  the  city  was  unwilling  to  continue  the 
company’s  exemption  from  taxation.  Accordingly,  an  ar¬ 
rangement  was  entered  into  by  an  ordinance  approved  Sept. 
26,  1884,  by  which  the  city  agreed  to  pay  $60  a  year  for 
each  fire-plug,  fire  hydrant  and  fire  well  connected  with  the 
company’s  mains.1  The  minimum  number  of  such  fixtures 
was  to  be  1139.  The  company  agreed  to  maintain  a  pressure 
of  not  less  than  50  feet  head  between  seven  o’clock  in  the 
morning  and  six  at  night.  In  time  of  drought,  the  city  was 
to  have  the  right  to  furnish  water  free  of  charge  to  persons 
living  outside  the  lines  of  the  company’s  pipes.  After  the 
date  of  this  ordinance  the  company  was  to  be  subject  to 
municipal  as  well  as  state  taxation. 

After  securing  the  forfeiture  of  the  company’s  franchise,, 
the  city  undertook  a  magnificent  scheme  of  water  supply, 
sewerage  and  drainage,  the  total  cost  of  which  will  aggregate 
$24,000,000.  The  water  works  alone,  which  have  been 
practically  completed,  are  being  built  at  a  cost  of  between 
$6,000,000  and  $7,000,000.  The  municipal  plant  includes 
about  450  miles  of  mains,  the  necessary  pumping  machinery, 
and  a  water  purification  plant.  The  source  of  supply  is  the 
Mississippi  River,  and  the  rapid  or  mechanical  system  of 
filtration  has  been  adopted.  Pending  the  completion  of  the 
city  water  works,  the  receiver  for  the  private  company  has 
been  permitted  to  continue  to  operate  the  old  plant,  such  as  it 
was;  but  the  majority  of  the  people  have  depended  for  their 
domestic  supply  upon  cisterns,  of  which  Superintendent  Earl 
said  there  were  65,000  in  1906. 

In  New  Orleans  the  difficulties  in  which  the  municipal! 

1  Ordinance  No.  909,  Council  Series. 


440 


MUNICIPAL  FRANCHISES. 


government  found  itself  in  its  early  history  led  to  the  grant¬ 
ing  of  a  franchise  even  for  a  sewerage  system.  This  plan  was 
so  much  of  a  failure  that  the  works  were  not  even  put  into 
operation.  The  usual  annual  death  rate  in  New  Orleans 
during  the  middle  of  the  last  century  ranged  from  40  to  60 
per  thousand  of  population.  In  more  recent  years  the  rate 
has  been  greatly  reduced,  and  the  people  of  the  city  expect, 
when  the  magnificent  improvements  now  under  construction 
have  been  completed,  that  the  sanitary  condition  of  the  city 
will  be  equal  to  that  of  other  cities  of  similar  size  and  that 
under  these  conditions  population  and  commerce  will  grow 
by  leaps  and  bounds.  In  this  case,  as  in  the  case  of  Los 
Angeles,  the  energy  and  common  effort  of  the  whole  people 
proved  to  be  necessary  for  the  undertaking  of  the  great  public 
utility  enterprises  upon  which  the  life  and  development  of  the 
community  depended. 

198.  Cut-throat  competition  followed  by  monopoly -Den¬ 
ver.  — The  City  of  Denver  owns  a  water  distributing  system  in 
that  portion  of  its  territory  formerly  known  as  South  Denver. 
This  plant  was  constructed  before  the  territory  was  annexed 
to  the  city.  On  December  15,  1894,  after  the  city  had  come 
into  possession,  the  plant  was  leased  to  the  Denver  Union 
Water  Company  for  a  period  of  about  15  years.1  The  com¬ 
pany  agreed  to  pay  as  rental  six  per  cent  on  the  appraised 
value  of  the  pipes,  mains,  hydrants  and  pumping  machinery 
transferred  to  it  under  the  lease.  The  company  agreed  to 
extend  the  mains  and  add  to  the  machinery  whenever 
necessary  for  public  convenience.  All  new  construction,  how¬ 
ever,  was  to  be  approved  by  the  city  engineer  before  the  com¬ 
mencement  of  work.  At  the  termination  of  the  lease  the 
city  was  to  take  back  the  property  with  the  improvements  and 
pay  the  company  the  appraised  value  of  the  new  construction, 
or,  as  an  alternative,  the  company  was  to  purchase  the  part 
of  the  plant  belonging  to  the  city  at  an  appraised  valuation. 
The  company  agreed  to  charge  the  same  rates  and  furnish 
the  same  quality  of  water  in  South  Denver  as  in  the  rest 
of  the  city.  The  value  of  the  city’s  plant,  as  fixed  by  the 
appraisers,  was  $142,209. 

The  main  water  plant  of  Denver  was  originally  constructed 
by  private  companies  under  franchise  rights  granted  by  the 

1  Franchises  and  Special  Privileges,  op.  cit.,  p.  671. 


WATER  SUPPLY  FRANCHISES. 


441 


city.  The  private  plant  was  first  established  about  1871  and 
was  grossly  inadequate  for  the  needs  of  a  growing  city.  The 
company  charged  the  city  $150  a  year  per  hydrant,  and  the 
consumers  were  not  permitted  to  use  the  water  for  irrigating 
lawns  or  trees.1  About  1880  a  new  plant  was  constructed. 
This  also  was  inadequate  for  a  growing  city.  In  1889,  just 
prior  to  the  expiration  of  the  old  company's  franchise,  a 
competing  company  was  organized  and  secured  a  grant  from 
the  city.  The  old  company's  franchise  was  also  renewed  a 
year  or  two  later,  and  there  resulted  such  fierce  competition 
between  the  two  companies  that  for  some  time  citizens  fortu¬ 
nate  enough  to  live  on  streets  in  which  both  companies  had 
mains  were  given  free  water.  The  result  of  the  competition 
was  the  same  as  it  has  been  everywhere  under  similar  circum¬ 
stances;  control  of  the  two  companies  was  secured  by  a  com¬ 
mon  interest,  and  competition  ceased.  It  is  needless  to  add 
that  there  was  no  more  free  water  for  the  consumers. 

Under  the  competing  franchise  granted  in  1889,  the  Citizens’ 
Water  Company  was  given  the  right  to  lay  its  mains  in  about 
nine  comprehensive  pages  of  streets;  but  it  was  stipulated 
that  the  grant  should  not  be  exclusive.  The  city  reserved  the 
right  to  purchase  “  the  plant,  rights  and  properties  "  of  the 
company,  upon  the  “  valuation  of  the  value  of  such  plant, 
lands,  water  rights  and  machinery  at  the  time  of  such  pur¬ 
chase  by  the  city,  less  the  deterioration  in  the  same  from 
use  and  wear".  The  appraisal  was  to  be  made  by  three 
disinterested  parties,  one  chosen  by  the  company,  one  by 
the  city,  and  the  third  by  the  first  two.  It  was  also  stipulated 
in  this  franchise  that  the  company  should  not  charge  higher 
rates  within  the  corporate  limits  of  the  city  than  the  rates 
being  charged  at  the  time  by  the  old  company  for  like  serv¬ 
ice.  The  company  agreed  to  have  40  miles  of  mains  in 
operation  within  three  years  and  thereafter  to  lay  at  least 
three  miles  a  year  during  the  20  years  for  which  the  franchise 
was  granted.  Unless  the  city  elected  to  purchase  the  plant 
before  May  9,  1891,  the  company  was  to  receive  a  contract 
to  furnish  water  for  extinguishing  fires,  sprinkling  streets, 
and  flushing  gutters  and  sewers,  upon  terms  and  conditions 
to  be  fixed  by  agreement  between  the  city  and  the  company, 

1  See  “  Economic  Struggle  in  Colorado”  by  Hon.  J.  Warren  Mills,  in  Arena  for 
October,  1905,  Vol.  34,  pp.  379-99. 


442 


MUNICIPAL  FRANCHISES. 


or,  in  case  of  disagreement,  to  be  fixed  by  the  president  of 
the  city  board  of  supervisors,  the  president  of  the  board  of 
aldermen,  two  persons  chosen  by  the  company,  and  a  fifth 
person  chosen  by  the  senior  judge  of  the  district  court  in  the 
county  of  Arapahoe.  Before  exercising  its  franchise  the  com¬ 
pany  was  required  to  execute  a  bond  in  the  amount  of  $20,- 
000  to  guarantee  that  it  would  properly  refill  all  excavations 
in  the  streets  and  would  assume  and  pay  all  damages  result¬ 
ing  from  its  negligence  in  the  construction  or  maintenance  of 
its  mains.  The  city  council  was  required  to  prescribe  by 
ordinance  reasonable  rules  and  regulations  for  the  protection 
of  the  company’s  mains  and  the  fire  hydrants,  to  prevent  the 
undue  waste  of  water  or  its  use  by  persons  who  were  not 
entitled  to  it.  The  grant  was  for  20  years  “  and  no  longer 
The  old  Denver  Water  Company,  predecessor  of  the  Denver 
Union  Water  Company,  secured  a  renewal  of  its  franchise  in 
1890.1  Its  rights  extended  to  less  than  four  pages  of 
enumerated  streets  and  alleys.  The  city  bound  itself,  how¬ 
ever,  to  give  the  company  similar  rights,  so  far  as  it  might 
have  authority  to  do  so  and  when  requested  to  do  so,  in  any 
streets  thereafter  laid  out  or  extended.  The  company  was 
required  to  assume  the  usual  liability  for  damages  resulting 
from  the  exercise  of  its  franchise.  If  in  any  case  the  com¬ 
pany  failed  for  twenty-four  hours  after  notice  to  restore  a 
street  to  good  condition  after  it  had  been  opened  for  laying  a 
water  main  or  setting  a  hydrant,  the  city  reserved  the  right  to 
do  the  work  at  the  company’s  expense.  The  company  was  re¬ 
quired  to  furnish  water,  upon  application,  “  through  connec¬ 
tions  to  be  made  by  parties  desiring  the  same,  to  premises 
abutting  upon  streets  in  which  it  may  have  a  pipe  laid  ”,  under 
reasonable  rules.  The  rates  to  private  consumers  were  not  to 
exceed  a  certain  schedule  attached  to  the  franchise;  but  the 
company  was  authorized  to  compel  any  consumer  to  furnish  a 
meter  and  pay  for  the  water  by  meter  measurement.  It  was 
provided,  however,  that  after  five  years  the  city  council  might 
require  the  company  “  to  fix  schedule  rates  for  private  con¬ 
sumers  equivalent  to  the  average  rate  prevailing  in  the  cities 
of  Chicago,  St.  Louis  and  Cincinnati  for  the  same  service  ”. 
The  company  was  bound  at  all  times  to  furnish  the  city  and 
private  consumers  water  “  of  a  quality  as  good  and  fit  for 

1  Franchises  an<j  Special  Privileges,  op.  cit.,  p.  692. 


WATER  SUPPLY  FRANCHISES. 


443 


private  consumption  as  that  shown  by  the  analysis  made  by 
order  of  the  City  of  Denver  by  Professor  Joseph  A.  Sewall 
in  the  month  of  August,  1889  ”.  Under  the  terms  of  the 
franchise  the  company  was  to  take  over  493  hydrants  belong¬ 
ing  to  the  City  of  Denver,  for  the  sum  of  $25,000.  These 
hydrants  were  to  be  replaced  within  a  year  with  new  hydrants 
“  having  two  nozzles  for  hose  and  one  for  steamer  connection 
and  with  not  less  than  a  six-inch  barrel  ”.  The  city  council 
was  required  to  designate  the  location  for  enough  additional 
hydrants  to  bring  the  total  number  on  the  company’s  existing 
mains  up  to  1,000,  all  of  which  were  to  be  placed  within  one 
year.  The  fire  hydrants  were  to  be  supplied  with  a  pressure 
equivalent  to  115  pounds  at  the  hydrant  in  front  of  the  Union 
Depot.  If,  as  a  result  of  the  extension  and  growth  of  the 
city,  as  many  as  50  hydrants  should  be  ordered  placed  at 
locations  where,  on  account  of  difference  of  elevation,  this 
pressure  would  be  less  than  45  pounds,  the  company  was  re¬ 
quired  to  establish  a  separate  high  service  and  maintain  in 
the  hydrants  connected  with  it  a  pressure  of  not  less  than  50 
pounds.  It  was  provided  that  “  the  act  of  God,  unavoidable 
accident,  interference  of  rioters  or  other  unlawful  disturb¬ 
ance  ”,  should  excuse  any  default  by  the  company  in  the  per¬ 
formance  of  its  obligation  to  furnish  water.  The  city  agreed 
to  pay  annually  $35  a  hydrant  for  the  first  ten  years  of  the 
grant  and  $25  a  hydrant  thereafter. 

At  the  expiration  of  20  years  the  city  was  to  have  the  right 
to  purchase  the  property.  If  the  price  could  not  be  arrived 
at  by  agreement,  the  fair  cash  value  of  the  water  works  was 
to  be  determined  by  arbitration.  There  were  to  be  five  ap¬ 
praisers,  none  of  them  to  be  residents  of  Denver  or  interested 
persons.  Two  were  to  be  selected  by  the  city,  two  by  the  com¬ 
pany,  and  the  fifth  by  the  first  four.  But  if,  after  the  city 
had  named  its  representatives  and  had  notified  the  company 
to  appoint  appraisers,  the  latter  failed  to  do  so  for  a  period 
of  30  days,  the  city  reserved  the  right  to  apply  to  any  court 
having  equity  jurisdiction  in  the  count}',  for  the  appoint¬ 
ment  of  two  persons  to  act  for  the  company.  It  was  provided 
that  the  decision  of  the  majority  of  the  appraisers  should 
be  binding  upon  both  parties,  and  that  upon  payment  or 
tender  of  payment  by  the  city,  the  company  should  transfer 
“  all  of  its  property,  real  or  personal,  easements,  rights  and 


444 


MUNICIPAL  FRANCHISES. 


privileges.”  In  case  the  city  did  not  care  to  purchase  at 
the  end  of  the  first  twenty-year  period,  it  held  the  option  of 
renewing  the  contract  for  a  like  period  of  twenty  years,  but 
at  a  hydrant  rental  10  per  cent  less  than  that  prevailing  at 
the  expiration  of  the  original  franchise.  The  city  also  had 
the  right  to  successive  renewal  periods  of  twenty  years  each 
at  the  same  price.  The  company  agreed  to  extend  its  mains 
upon  any  street  where  no  mains  had  been  laid,  whenever 
ordered  to  do  so  by  a  city  ordinance,  and  to  set  fire  hydrants, 
which  were  to  be  rented  by  the  city  at  the  rates  already  men¬ 
tioned;  but  no  extension  could  be  required  unless  the  city 
took  a  hydrant  for  every  400  feet  of  the  extension.  No 
mains  were  to  be  laid  having  a  diameter  of  less  than  six 
inches.  The  company  agreed  to  furnish  free  water  for  use  in 
the  city  hall  and  fire  department  houses,  and  also  for  flushing 
sewers  and  gutters  and  for  sprinkling  purposes.  The  old 
hydrants  purchased  from  the  city  could  be  used  in  connec¬ 
tion  with  the  sprinkling  service.  The  city  and  the  company 
agreed  each  to  appoint,  once  every  three  years,  a  competent 
person  to  serve  with  a  third  person  to  be  chosen  by  these  two 
as  a  board  or  committee  to  whom  all  complaints  by  either 
party  against  the  other  for  any  violation  of  the  terms  of  the 
ordinance  could  be  referred,  as  well  as  any  controversy  as 
to  the  meaning  of  the  ordinance  or  as  to  the  framing  or 
amendment  of  rules  for  the  use  of  water  for  public  purposes. 
It  was  expressly  stipulated  that  the  company  should  not,  by 
the  acceptance  of  the  ordinance,  lose  any  of  its  existing 
rights  in  regard  to  the  occupation  of  the  streets.  All  of  the 
mains  and  other  fixtures  in  possession  of  the  company  at  the 
time  the  franchise  was  granted,  together  with  any  other  fix¬ 
tures  laid  in  the  streets,  were  to  remain  the  company’s  “  sole 
and  absolute  property  ”,  except  in  case  of  purchase  by  the 
city. 

The  clause  of  this  franchise  authorizing  the  city  to  re¬ 
quire  a  readjustment  of  rates  to  correspond  with  the  average 
rates  charged  in  certain  other  cities  where  municipal  owner¬ 
ship  prevailed,  was  greeted  at  the  time  of  the  grant  as  a  great 
concession  to  the  city.  However,  when  an  attempt  was  made 
to  enforce  the  requirement,  the  company  calmly  announced 
that  it  was  wholly  impossible  to  arrive  at  the  average  rates 


WATER  SUPPLY  FRANCHISES.  445 

charged  by  the  three  cities  mentioned.  Litigation  resulted, 
and  the  city  secured  slight  concessions. 

On  March  20,  1909,  a  board  of  appraisers  appointed  to 
value  the  property  with  a  view  to  purchase  by  the  city  at  the 
expiration  of  this  franchise,  reported  the  total  fair  cash  value 
of  the  company’s  works  and  business  as  being  $14,400,000, 
distributed  as  follows : 1 

(a)  For  physical  plant,  with  deductions  for  depreciation 


and  allowances  for  appreciation .  $10,354,075. 

(b)  For  water  rights  owned  or  used  by  the  company .  2,845,925. 


(c)  For  business  and  going-concern  value,  “representing 
the  added  value  of  the  plant  because  of  its  connections  and 
business,  and  because  the  parts  are  united  into  one  system 
and  are  tested  and  in  successful  use,  and  the  value  of  the 
business  during  the  remainder  of  the  present  franchise 
term  ” .  1,200,000 

199.  Water  franchises  granted  to  mining  companies — 
Butte,  Mont. — By  an  ordinance  approved  March  5,  1890, 
the  City  of  Butte  granted  a  perpetual  right  of  way  to  the 
Silver  Bow  Hydraulic  Mining  Company,  authorizing  the 
company  to  use  all  the  streets  and  alleys  of  the  city  for  lay¬ 
ing  water  pipes  to  supply  water  to  the  city  and  its  inhabit¬ 
ants.2  Under  this  grant  the  water  works  were  to  be  com¬ 
pleted  within  thirty  months,  and  the  amount  of  water  to  be 
conveyed  was  to  be  “not  less  than  one  hundred  inches  of 
water,  measured  in  accordance  with  the  provisions  of  the 
statutes  of  the  State  of  Montana,  and  such  water  shall  be 
pure  and  of  good  quality  The  water  was  to  be  brought  to 
such  a  point  above  the  city  that  the  pressure  in  the  pipes  on 
Copper  street  would  be  “  equal  to  at  least  150  feet  perpendic¬ 
ular  It  was  provided  that  the  company’s  mains  should  be 
“  of  wrought-iron,  standard,  lap-welded  pipe,  or  its  equiva¬ 
lent  in  strength  An  elaborate  schedule  of  flat  rates  was 
established  in  the  ordinance.  A  monthly  charge  for  a  resi¬ 
dence  of  from  one  to  six  rooms  was  fixed  at  $1.50.  From 
this  minimum,  residence  rates  increased  to  $2.75  per  month 
for  a  residence  of  fifteen  or  sixteen  rooms.  Sprinkling  rates 
were  established  at  $10  for  the  season  for  a  lot  not  more  than 
35  feet  wide,  the  water  to  be  passed  through  a  hose  with  a 
nozzle  not  greater  than  one-fourth  of  an  inch;  and  $12  for 
a  lot  from  35  to  50  feet  wide.  The  rate  for  each  private 

1  Report  of  the  Board  of  Appraisers  and  Arbitrators  to  the  Mayor  and  City 
Council  and  the  Denver  Union  Water  Co.,  March  20,  1909. 

*  Franchise  Ordinances  of  the  City  Butte,  op.  cit.,  p.  445. 


446 


MUNICIPAL  FRANCHISES. 


bath-tub  was  50  cents  a  month.  In  any  case  where  the  com¬ 
pany  was  unwilling  to  furnish  water  at  schedule  rates,  it 
wras  authorized  to  dispose  of  it  by  meter  at  a  rate  ranging 
from  50  cents  per  1000  gallons  where  the  monthly  use  was 
less  than  that  amount,  to  20  cents  per  1000  gallons  where 
the  monthly  use  exceeded  twenty  times  that  amount.  The 
company  wras  to  file  a  $25,000  bond  to  indemnify  the  city 
against  damage.  The  franchise  was  to  be  perpetual  unless, 
on  account  of  the  company’s  failure  to  fulfill  the  conditions 
imposed  upon  it,  the  city  should  upon  reasonable  notice 
revoke  the  ordinance. 

Other  water  franchises  in  Butte  seem  to  have  been  granted 
primarily  for  mining  purposes.  By  one  of  these  grants,  how¬ 
ever,  approved  September  18,  1897,  the  Moulton  Mining 
Company  was  authorized  to  construct  and  maintain  lines  of 
water  pipes  along  certain  specified  streets,  for  the  purpose  of 
a  public  supply.1  The  franchise  provided  that  the  com¬ 
pany  should  proceed  in  its  construction  work  in  such  a  man¬ 
ner  as  to  cause  the  public  the  least  inconvenience  in  the  usual 
and  ordinary  use  of  the  streets,  and  so  as  to  leave  a  free  and 
unobstructed  passage  along  the  street  at  least  30  feet  wide 
at  all  points.  Excavations  in  the  streets  were  to  be  properly 
protected  and  the  street  surfaces  were  to  be  replaced  in  their 
former  condition.  The  company  was  authorized  to  supply 
the  inhabitants  of  the  city  with  water  “  for  general  use  ”.  It 
was  agreed,  however,  that  the  company  did  not  obligate  itself 
to  do  so.  It  wras  also  provided  that  the  furnishing  of  water 
to  private  consumers  “  shall  at  all  times  be  the  subject  of 
private  contract  ”  between  the  company  and  its  consumers. 
In  case  no  contract  was  entered  into,  however,  the  rates  were 
to  be  according  to  an  elaborate  schedule  fixed  in  the  ordi¬ 
nance.  This  schedule  was  substantially  the  same  as  the  one 
fixed  in  the  Silver  Bow  Mining  Company’s  franchise  above 
described.  In  this  case  also  the  franchise  was  to  be  per¬ 
petual,  although  the  city  reserved  the  right  to  declare  it 
forfeited  in  case  the  company  failed  to  comply  with  its  con¬ 
ditions. 

200.  Exemption  from  taxation ;  rates ;  quality  of  water, 
etc.— Birmingham,  Ala.  — x4s  early  as  September  21,  1872, 

1  City  Ordinances,  City  of  Butte,  p.  462. 

*  Franchises,  Contracts  and  Special  Ordinances,  City  of  Birmingham,  1907,  p.  416. 


WATER  SUPPLY  FRANCHISES. 


447 


the  City  of  Birmingham  entered  into  a  contract  with  a 
private  individual  to  secure  the  construction  of  water  works.1 
The  city  agreed  to  exercise  the  right  of  eminent  domain  on 
behalf  of  the  contractor  wherever  necessary  in  order  to  en¬ 
able  him  to  secure  a  proper  source  of  supply.  The  city  also 
agreed  to  put  in  25  fire-plugs  and  pay  the  contractor  a  rental 
of  $50  a  year  each  for  water  to  supply  them.  Additional 
plugs  installed  by  the  city  were  to  bring  a  rental  of  $40  each. 
This  contract  was  for  a  period  of  25  years.  The  city  agreed 
to  exempt  the  water  works  from  taxation  for  that  period. 
The  prices  charged  by  the  grantee  were  not  to  exceed  those 
charged  in  the  City  of  Chattanooga  on  June  18,  1870,  and 
in  case  the  meter  system  was  adopted  the  rate  was  not  to  ex¬ 
ceed  ten  cents  per  hundred  gallons.  It  was  stipulated  that 
the  grant  was  not  exclusive  and  that  the  city  might  purchase 
the  plant,  “  together  with  all  the  property,  rights,  privileges 
and  easements  connected  therewith  ”,  at  any  time  after 
twenty  years,  the  price  to  be  fixed  by  arbitration. 

In  1888  a  new  water  franchise  was  granted  to  the  Birming¬ 
ham  Water  Works  Company,  to  enable  the  company  to 
secure  a  better  source  of  supply  and  construct  a  more 
adequate  system.2  This  new  franchise  was  without  time 
limit.  It  provided  that  the  water  furnished  by  the  company 
should  be  “  clear,  wholesome  and  suitable  for  all  domestic 
and  ordinary  manufacturing  purposes,  and  sufficient  in 
quantity  for  the  use  of  said  city  and  its  inhabitants  and  for 
all  manufacturing  purposes”.  In  addition  to  the  existing 
machinery  with  an  aggregate  capacity  of  5,000,000  gallons 
daily,  another  pumping  station  with  equal  capacity  was  to  be 
established.  It  was  provided  that  the  company’s  system  of 
mains  was  to  be  such  as  to  “  cover,  supply  and  keep  sup¬ 
plied,  all  portions  of  streets  of  the  city  which  it  may  be  neces¬ 
sary  to  supply  ”.  The  company  was  to  place  200  fire 
hydrants  on  its  mains,  so  located  as  to  be  not  more  than  500 
feet  apart  on  the  average.  The  city  agreed  to  pay  an  annual 
rental  of  $55  for  each  hydrant.  Water  used  by  the  city  for 
public  purposes  other  than  fire  protection  and  the  practice  of 
firemen,  was  to  be  paid  for  at  the  rate  of  15  cents  per  thou¬ 
sand  gallons.  The  company  agreed  to  extend  its  mains 

1  Franchises.  Contracts  and  Special  Ordinances,  City  of  Birmingham,  1907,  p.  416. 

*  Ibid.,  p.  421. 


448 


MUNICIPAL,  FRANCHISES. 


within  a  reasonable  time  after  the  city  had  located  one 
hydrant  on  each  1,000  feet  of  the  proposed  extension.  The 
contract,  so  far  as  it  related  to  hydrant  rental,  was  to  be  in 
effect  for  a  period  of  30  years.  At  the  expiration  of  that 
period  and  of  each  recurring  period  of  ten  years  thereafter, 
the  city  would  have  the  right  to  purchase  the  water  works 
at  an  appraised  valuation.  The  franchise  contained  a 
schedule  of  maximum  domestic  rates.  The  meter  rates 
ranged  from  30  cents  per  thousand  gallons  for  consumers 
using  less  than  1,000  gallons  per  day,  to  15  cents  per  thou¬ 
sand  gallons  for  the  first  5,000  gallons  of  daily  use  and  a 
lower  rate  for  additional  use,  so  that  all  in  excess  of  40,000 
gallons  a  day  would  bb  charged  for  at  the  rate  of  8  cents  per 
thousand.  The  company  reserved  the  right  to  put  in  meters 
and  charge  an  annual  rental  ranging  from  $3  for  a  half¬ 
inch  meter  to  $50  for  a  four-inch  meter.  The  flat  rate  for 
a  dwelling  of  three  rooms  or  less  was  fixed  at  $8  a  year. 

201.  Regulation  of  rates-r  Knoxville. — The  City  of 
Knoxville  is  supplied  with  water  by  a  private  company.  On 
January  4,  1909,  the  Supreme  Court  of  the  United  States 
handed  down  a  decision  in  the  case  of  the  Mayor  and  Aider- 
men  of  the  City  of  Knoxville  vs.  The  Knoxville  Water  Com¬ 
pany,  in  which  it  decided  that  a  public  service  corporation  is 
not  entitled  to  an  injunction  restraining  the  operation  of  a 
statute  or  municipal  ordinance  fixing  maximum  rates  to  be 
charged,  unless  the  company  can  show  that  it  is  a  clear  case 
of  confiscation  of  property.1  In  this  particular  case  the 
litigation  had  been  pending  since  December  7,  1901,  when 
the  company  brought  suit  to  restrain  the  city  from  enforc¬ 
ing  a  rate  regulating  ordinance  enacted  March  30,  1901. 
During  these  eight  years  the  company  had  refused  to  put  the 
rates  fixed  by  the  city  into  effect.  In  the  lower  court  a  mas¬ 
ter  had  been  appointed  to  make  a  valuation  of  the  company’s 
plant  and  property  used  in  its  business  at  the  time  of  the 
passage  of  the  ordinance.  According  to  the  master’s  reckon¬ 
ing,  the  rates  prescribed  by  the  city  ordinance  would,  if  en¬ 
forced,  reduce  the  company’s  net  income  to  a  trifle  less  than 
six  per  cent  on  this  valuation.  The  court  refused  to  be  bound 
by  the  findings  of  the  master,  stating  that  he  did  not  make 
proper  allowance  for  depreciation.  The  court  also  found 

1  Text  of  decision  taken  from  New  York  Law  Journal  for  Jan.  28, 1909,  vol.  xl.. 
No.  99. 


WATER  SUPPLY  FRANCHISES. 


449 


that  there  were  wide  differences  in  the  testimony  relative  to 
the  cost  of  reproduction.  The  opinion  in  this  case  was 
delivered  by  Mr.  Justice  Moody,  who  said: 

“  Where  the  case  rests,  as  it  does  here,  not  upon  observation  of  the 
actual  operation  under  the  ordinance,  but  upon  speculations  as  to  its 
effect,  based  upon  the  operations  of  a  prior  fiscal  year,  we  will  not 
guess  whether  the  substantial  return  certain  to  be  earned  would  lack 
something  of  the  return  which  would  save  the  effect  of  the  ordinance 
from  confiscation.  It  is  enough  that  the  whole  case  leaves  us  in  grave 
doubt.  The  valuation  of  the  property  was  an  estimate  and  is  greatly 
disputed.  The  expense  account  was  not  agreed  upon.  The  ordinance 
had  not  actually  been  put  into  operation;  the  inferences  were  based 
upon  the  operations  of  the  preceding  year ;  and  the  conclusion  of  the 
court  below  rested  upon  that  most  unsatisfactory  evidence,  the  testi¬ 
mony  of  expert  witnesses  employed  by  the  parties.  The  city  authori¬ 
ties  acted  in  good  faith,  and  they  tried,  without  success,  to  obtain  from 
the  company  a  statement  of  its  property,  capitalization  and  earnings. 

“  The  courts,  in  clear  cases,  ought  not  to  hesitate  to  arrest  the  opera¬ 
tion  of  a  confiscatory  law,  but  they  ought  to  refrain  from  interfering  in 
cases  of  any  other  kind.  Regulation  of  public  service  corporations, 
which  perform  their  duties  under  conditions  of  necessary  monopoly 
will  occur  with  greater  and  greater  frequency  as  time  goes  on.  It  is  a 
delicate  and  dangerous  function,  and  ought  to  be  exercised  with  a  keen 
sense  of  justice  on  the  part  of  the  regulating  body,  met  by  a  frank  dis¬ 
closure  on  the  part  of  the  company  to  be  regulated.  The  courts  ought 
not  to  bear  the  whole  burden  of  saving  property  from  confiscation, 
though  they  will  not  be  found  wanting  where  the  proof  is  clear.  The 
legislatures  and  subordinate  bodies,  to  whom  the  legislative  power  has 
been  delegated,  ought  to  do  their  part.  Our  social  system  rests  largely 
upon  the  sanctity  of  private  property,  and  that  state  or  community 
which  seeks  to  invade  it  will  soon  discover  the  error  in  the  disaster 
which  follows.  The  slight  gain  to  the  consumer,  which  he  would 
obtain  from  a  reduction  in  the  rates  charged  by  public  service  corpora¬ 
tions,  is  as  nothing,  compared  with  his  share  in  the  ruin  which  would 
be  brought  about  by  denying  to  private  property  its  just  reward,  thus 
unsettling  values  and  destroying  confidence.  On  the  other  hand,  the 
companies  to  be  regulated  will  find  it  to  their  lasting  interest  to  furnish 
freely  the  information  upon  which  a  just  regulation  can  be  based.” 

202.  Hot  water  from  natural  springs -Salt  Lake  City ;  Boise. — 

By  an  ordinance  in  effect  March  2,  1893,  Salt  Lake  City 
gave  a  franchise  to  Harvey  M.  Bacon  “  for  the  purpose  of 
erecting  and  maintaining  a  bathing  resort,  or  sanitarium,  or 
both,  in  said  city,  where  the  hot  mineral  waters  of  the 
springs  in  or  near  the  north  part  of  the  city  may  be  used  ”.1 
Under  this  franchise  the  grantee  was  authorized  to  lay  water 
pipes  in  certain  streets,  subject  to  the  approval  of  the  City 
Engineer.  The  grantee  was  also  authorized  to  connect  his 
sanitarium  or  bath  with  the  public  sewer  by  dicharge  pipes 

1  Ordinances,  Salt  Lake  City,  p.  565. 


450 


MUNICIPAL  FRANCHISES. 


for  carding  off  the  waste  mineral  waters.  It  was  provided, 
however,  that  if  at  any  time  the  waters  from  the  grantee’3 
resort  should  have  any  deleterious  effect  upon  the  sewer 
pipes,  he  should  be  required  to  disconnect  his  discharge  pipes, 
and  in  that  case  should  be  permitted  to  convey  waste  water 
by  a  separate  pipe  along  the  streets  to  the  Jordan  River.  The 
franchise  was  granted  for  a  period  of  twenty-five  years,  and 
the  grantee  was  made  responsible  for  any  accident  or  dam¬ 
age  resulting  from  its  exercise.  The  bath  resort  or  sani¬ 
tarium  was  to  be  in  operation  within  six  months  or  the 
franchise  would  be  forfeited.  In  fact,  the  grantee  was  re¬ 
quired  to  furnish  a  $25,000  bond  to  guarantee  that  the 
sanitarium  would  be  in  operation  within  the  time  required. 

The  Boise  Artesian  Hot  and  Cold  Water  Company, 
Limited,  under  its  water  works  franchise  supplies  hot  water 
for  heating  and  domestic  use  to  consumers  in  the  City  of 
Boi  se.1  The  supply  of  hot  water  is  brought  through  iron 
pipes  from  three  artesian  wells  about  two  and  one-half  miles 
distant  from  the  city.  The  temperature  of  the  water  at 
the  wells  is  said  to  be  170  degrees.  The  water  is  brought  by 
gravity  and  is  sold  at  rates  based  upon  the  size  of  the  waste 
attached  to  the  lower  end  of  each  house  system  where  it 
enters  into  the  sewer.  This  waste  is  put  in  by  the  company 
and  is  always  controlled  by  it.  Ho  one  else  is  permitted  to 
interfere  with  it  in  any  way.  Hot  water  rates  were  raised 
25  per  cent  on  October  1,  1906,  and  another  increase  of 
20  per  cent  was  announced  to  take  effect  October  1, 
1909.  The  rates  in  effect  May  12,  1909,  ranged  from  $93.75 
per  annum  for  a  one-eighth  inch  waste,  to  $1112.50  per 
annum  for  a  three-fourths  inch  waste.  Hot  water  for  do¬ 
mestic  use  on  premises  not  supplied  for  heating  purposes  is 
furnished  during  the  summer  months  to  houses  along  the 
hot  water  pipe  lines  at  special  rates.  The  capacity  of  the 
company’s  flowing  wells  is  said  to  have  been  800,000  gallons 
per  24  hours  until  it  was  increased  in  December,  1908,  to 
1,300,000  gallons  a  day  by  the  installation  of  a  system  of  air 
pumps. 

1  Information  contained  in  a  letter  dated  May  12, 1909,  from  the  secretary  of 
the  company. 


CHAPTER  XIY. 

SEWER  FRANCHISES. 

203.  Sewers  and  drains  seldom  operated  206.  Exclusive  franchise  in  a  little  town. 

by  private  companies.  —Long  Branch,  N.  J. 

204.  Capitalization  of  sewerage  and  207.  Extensions  to  be  based  on  reason- 

drainage  undertakings.  able  revenue.— Austin,  Tex. 

205.  A  failure  of  private  enterprise  to  208.  A  detailed  schedule  of  rates  and 

render  service.— New  Orleans.  discounts. — Atlantic  City,  N.  J. 

203.  Sewers  and  drains  seldom  operated  by  private  com¬ 
panies. — In  the  Municipal  Year  Book  published  in  1902, 
there  is  given  a  list  of  forty-seven  cities  and  towns  in  the 
United  States  having  sewerage  systems  operated  by  private 
companies  under  franchises.1  These  places  ranged  in  popu¬ 
lation,  according  to  the  census  of  1900,  from  27,838  down  to 
3,015.  There  were  411  other  places  having  more  than  3,000 
population  without  sewerage  systems  and  1,045  other  places  of 
like  population  having  sewerage  systems  publicly  owned  and 
operated.2  Indeed,  five  of  the  forty-seven  places  with  private 
sewerage  systems  also  had  public  sewers.  Copies  of  sewer 
franchises  are  like  rare  books,  hard  to  get.  The  business  of 
providing  sewerage  and  drainage  for  the  people  of  the  urban 
communities  has  become  so  generally  regarded  as  a  strictly 
municipal  function  that  comparatively  few  people  know  of 
the  existence  of  sewer  franchises.  There  is  practically  no 
available  literature  on  the  subject.  It  is  known  that  private 
sewers  are  frequently  established  with  or  without  municipal 
authority  to  serve  certain  individuals  or  neighborhoods  in  ad¬ 
vance  of  the  establishment  of  a  public  sewer  system.  “  The 
practice  of  allowing  private  sewers  to  be  built  in  the  public 
streets  ”,  says  Mr.  M.  U.  Baker,3  “  unless  in  conformity  with 
a  well-conceived  plan  for  the  whole  city,  is  highly  objection¬ 
able.  It  results  in  bad  sanitation,  poor  economy  and  much 
possible  litigation ;  for  when  the  city  comes  to  put  in  a  thor- 

1  Page  xxxiii. 

1  Ibid ,  page  xxx. 

8  Municipal  Engineering  and  Sanitation,  page  130. 

451 


452 


MUNICIPAL  FRANCHISES. 


oughgoing  sewerage  system,  it  is  liable  to  find  these  private 
sewers  so  poorly  designed  and  built  as  to  be  almost  useless, 
notwithstanding  which  the  owners  insist  on  having  them 
bought  by  the  city,  or  at  least  resist  an  assessment  to  meet  the 
cost  of  suitable  new  sewers.” 

Sewerage  is  regarded  under  modern  conditions  as  a  serv¬ 
ice  absolutely  essential  to  the  health  and  well-being  of 
every  important  city.  While  it  is  true  that  the  cities  of  New 
Orleans  and  Baltimore  have  until  very  recently  gotten  along 
without  a  system  of  sanitary  sewers,  how  they  have  been  able 
to  do  it  has  been  the  wonder  of  the  country.  The  thought 
of  a  great  city  without  sewers  excites  disgust  in  the  mind  of 
the  average  American  citizen. 

It  is  a  little  difficult  to  explain  the  overwhelming  pre¬ 
ponderance  of  municipal  ownership  and  operation  of  sewer 
systems.  It  would  seem  that  a  utility  which  requires  a  system 
of  underground  pipes  as  extensive  as  the  system  needed  for 
the  distribution  of  wTater,  and  which  is  regarded  as  essential 
to  the  health  and  welfare  of  all  the  citizens,  would  offer  an  at¬ 
tractive  field  for  private  enterprise.  Sewers  are  distinguished 
from  other  utilities  in  this  respect,  however,  that  once  con¬ 
structed  they  for  the  most  part  operate  themselves.  A  sew¬ 
erage  system  must  be  constructed  on  the  gravity  principle, 
and  excepting  in  those  cities  whose  topography  is  such  that 
no  natural  outlet  can  be  obtained,  there  is  no  pumping  to  be 
done.  In  1905  of  154  cities  whose  statistics  were  collected 
by  the  Census  Bureau,  only  nine  reported  that  all  their  sewage 
was  pumped,  and  nine  others  that  a  part  of  it  was  pumped. 
“  The  general  rule  observed  by  American  cities  of  all  sizes  ”, 
says  Mr.  Baker  in  a  supplemental  report,1  “is  to  discharge 
their  sewage  into  the  nearest  available  water  until  the  nuis¬ 
ance  becomes  intolerable  to  themselves,  and  then  to  divert  it 
from  their  own  shores,  resting  content  with  inflicting  their 
wastes  on  neighbors  below,  until  public  protests  or  lawsuits 
make  necessary  the  adoption  of  remedial  measures.  This  is 
not  saying  that  all  cities  should  build  either  diversion  or 
purification  works  for  the  protection  of  themselves  and  their 
neighbors,  for  that  is  not  necessary  in  the  present  state  of 
public  sanitation  so  long  as  the  sewage  can  be  inoffensively 

1  Bureau  of  the  Census,  Special  Reports  ;  “  Statistics  of  Cities  having  a  Popula¬ 
tion  of  over  30,000  ;  1S05,”  appendix  A,  page  100. 


SEWER  FRANCHISES. 


453 


disposed  of  in  near-by  waters.”  In  fact,  there  were  only 
sixteen  cities  with  a  population  of  more  than  30,000  each 
that  reported  sewage  disposal  works  in  1905.  In  the  ab¬ 
sence  of  pumping  and  a  purification  plant,  there  is  required, 
in  what  might  be  called  a  normal  type  of  sewerage  system,  a 
very  small  administrative  force  for  operating  purposes.  This 
simplicity  of  administration  naturally  is  conducive  to  public 
ownership,  and  conversely  is  unattractive  to  private  enter¬ 
prise.  Furthermore,  sewerage  is  regarded  as  strictly  a  sani¬ 
tary  measure  which  cannot  be  left  to  the  caprice  or  con¬ 
venience  of  private  initiative.  While  a  sanitary  sewerage 
system  is  impossible  without  water  works,  and  is  in  fact  sub¬ 
sidiary  to  a  water  supply  system,  with  which  it  must  be  con¬ 
nected  for  the  purpose  of  carrying  away  the  wastes  of  the 
city,  it  is  regarded  as  even  more  fundamentally  a  health  func¬ 
tion  than  the  water  supply  is.  It  is  hard  to  believe,  however, 
that  the  almost  entire  absence  of  private  operation  of  sewer¬ 
age  systems  is  the  result  merely  of  sanitary  considerations 
or  of  simplicity  of  administration.  Additional  cause  must  be 
found  in  the  unwillingness  of  citizens  generally  to  purchase 
a  service  of  this  nature  of  their  own  free  will.  Indeed,  sew¬ 
erage  differs  from  other  public  services  in  that  it  is  not  a 
utility  manufactured  or  brought  to  the  people,  but  simply  a 
process  of  getting  rid  of  their  wastes.  Except  in  the  rare 
instances  where  sewage  farms  have  been  developed,  or  the 
sludge  from  purification  works  is  disposed  of  for  fertilizer, 
there  is  nothing  to  be  done  with  sewage  but  to  get  rid  of  it; 
and  14ie  rule  “  out  of  sight,  out  of  mind  ”  apparently  affects 
the  willingness  of  citizens  to  pay  for  the  disposal  of  wastes. 
This  same  difficulty  is  universally  experienced  where  the  re¬ 
moval  of  garbage  is  left  to  private  companies  to  be  paid  for 
by  the  individual  householders. 

204.  Capitalization  of  sewerage  and  drainage  undertakings. 

— There  are  no  complete  statistics  of  the  cost  of  existing 
sewerage  and  drainage  systems  available.  The  nearest  meas¬ 
ure  of  the  amount  of  capital  invested  in  these  enterprises  is 
the  outstanding  municipal  debt  incurred  for  sewers,  though 
the  actual  cost  of  the  sewers  is  doubtless  much  greater  than 
the  amount  of  the  bonds  outstanding  against  them.  Ac¬ 
cording  to  the  special  Census  report  on  the  “  Statistics  of 
Cities  ”  for  the  year  1906,  there  was  in  that  year  an  aggre- 


454 


MUNICIPAL  FRANCHISES. 


gate  municipal  sewer  debt  in  cities  of  more  than  30,000 
population  amounting  to  about  $107, 000, 000. 1  According  to 
the  report  for  the  preceding  year,  1905,  there  were  approxi¬ 
mately  21,000  miles  of  sewers  in  operation  in  154  cities.2 
In  the  four  largest  cities  of  the  country  there  were  altogether 
about  900,000  house  connections  with  sewers. 

There  are  two  kinds  of  sewer  systems.  What  is  known  as 
the  separate  system  provides  for  the  disposal  of  household 
and  manufacturing  wastes  only.  The  combined  system,  on 
the  other  hand,  provides  also  for  the  disposal  of  surface  drain¬ 
age.  Sanitary  sewers  are  much  smaller  and  less  expensive 
than  combined  sewers.  They  are  also  better  adapted  to  the 
modern  idea  of  sewage  disposal.  Formerly  all  that  the 
sewer  system  attempted  to  do  was  to  carry  off  the  city’s 
wastes  and  empty  them  into  the  sea  or  a  flowing  stream. 
Since  the  danger  of  the  pollution  of  public  water  supplies  has 
become  acute  through  the  great  increase  of  population  and 
the  multiplication  of  cities,  much  more  elaborate  sewerage 
systems  are  being  established.  It  is  to  be  expected  that  with 
the  increasing  density  of  population  and  the  greater  enlight¬ 
enment  in  regard  to  sanitation  the  cost  of  sewers  and  sewage 
disposal  will  be  greatly  increased.  The  policy  of  municipal 
ownership  and  operation  is  so  well  established  however,  that 
there  is  no  likelihood  of  sewer  franchises  increasing  in  im¬ 
portance.3 

205.  A  failure  of  private  enterprise  to  render  Service- 
New  Orleans. — Sewerage  is  particularly  difficult  in  New 
Orleans  inasmuch  as  the  city  lies  below  the  level  of  the 
Mississippi  River,  so  that  it  is  necessary  to  pump  all  sewage, 
and  difficult  to  get  a  proper  fall  to  secure  a  flow  of  the  sew¬ 
age  through  the  streets  to  a  point  where  it  can  be  pumped 
into  the  river.  Two  efforts  to  solve  this  problem  by  private 
enterprise  failed.  The  first  of  these  was  made  in  1881,  when 
the  city  took  advantage  of  general  state  legislation  author¬ 
izing  the  granting  of  municipal  sewerage  franchises  and  en¬ 
tered  into  a  contract  with  the  New  Orleans  Drainage  and 
Sewerage  Company  for  the  construction  of  a  system  which 

1  Page  261. 

2  Pages  342-346. 

3  For  a  brief  description  of  the  various  methods  of  sewage  disposal,  such  as 
screening,  sedimentation,  chemical  precipitation,  septic  tanks,  intermittent  filtra¬ 
tion,  sewage  farming,  contact  beds  and  percolating  filters,  see  Mr.  Baker’s  special 
report  constituting  Appendix  A  of  the  “  Statistics  of  Cities  ”  for  1905. 


SEWER  FRANCHISES. 


455 


was  to  be  operated  on  a  commercial  basis.  The  plan  was  an 
absolute  failure,  not  even  resulting  in  commencement  of  con¬ 
struction  work.1  Eleven  years  later,  in  1882,  a  new  sewerage 
franchise  was  granted  which  passed  into  the  hands  of  the 
New  Orleans  Sewerage  Company.  This  project  got  as  far 
as  the  adoption  of  plans  and  the  construction  of  3,600  feet 
of  the  main  sewer  and  several  miles  of  laterals,  when  the  com¬ 
pany’s  finances  gave  out.  Its  works  were  finally  purchased  by 
the  city  and  incorporated  in  the  plans  for  the  big  sewerage 
and  drainage  system  which  is  only  now  being  completed  as  a 
public  enterprise. 

206.  Exclusive  franchise  in  a  little  town— Long  Branch, 

N.  J. — According  to  the  last  Federal  Census,  the  city  of 
Long  Branch  had  a  population  of  8,872.  By  an  ordinance 
approved  April  14,  1906,  this  city  granted  to  the  Long 
Branch  Sewer  Company  “  for  the  period  of  twenty  years  yet 
to  come,  the  exclusive  right  to  establish,  construct,  maintain 
and  operate,  without  competition,  within  the  limits  of  the 
city  of  Long  Branch,  a  comprehensive  system  of  sewerage  for 
the  purpose  of  sewering  and  the  removal  of  the  sewerage 
from  all  the  houses  and  buildings  in  said  limits  ”.2  The  com¬ 
pany  was  expressly  authorized  to  “  open,  excavate  and  dig 
up  any  and  all  public  streets,  avenues  or  alleys  ”  within  the 
city  limits  for  the  purpose  of  laying  sewers,  making  con¬ 
nections  with  them  and  repairing  them.  The  company  agreed 
to  extend  its  main  line  of  sewer  pipes  to  a  certain  point  desig¬ 
nated  in  the  ordinance,  within  a  period  of  two  years.  The 
company  was  required  not  to  open  any  street  or  alley  to  a 
greater  extent  than  500  feet  at  any  one  time,  and  during  the 
continuance  of  any  excavation  the  company  was  required  to 
keep  the  street  open  to  public  travel  if  its  width  made  that 
possible,  and  to  mark  each  opening  at  night  “by  sufficient 
lights  as  a  warning  of  danger  to  the  travelling  public  99 .  The 
company  also  was  bound  to  “  save  the  city  free  and  harmless 
from  all  damage  that  may  result  or  happen  to  the  travelling 
public  and  property  owners 99  along  the  line  of  the  streets 
and  alleys  opened  by  the  company.  All  excavations  were  to 
be  refilled  and  the  street  surface  was  to  be  left  in  as  good 
condition  as  the  company  found  it,  and  maintained  by  the 

1  See  article  on  “  The  Sewerage  of  New  Orleans,”  by  W.  T.  Crotts,  in  Journal  of 
Association  of  Engineering  Societies ,  Nov.  1901,  vol.  27,  p.  190. 

3  The  author  secured  a  typewritten  copy  of  this  ordinance  from  the  city  clerk. 


45G 


MUNICIPAL  FRANCHISES. 


company  for  a  period  of  three  months  after  its  restoration. 
During  the  months  of  June,  July,  August  and  September 
the  company  was  forbidden  to  open  any  street  for  sewer  work 
without  special  permission,  except  for  the  purpose  of  making 
necessary  repairs  and  sewer  connections.  No  excavation  in 
a  public  place  was  to  be  left  open  “  for  any  unreasonable 
length  of  time  ”.  The  sewerage  of  the  city  buildings  or  of 
any  building  used  for  storage  or  fire  apparatus  for  city  pur¬ 
poses  then  existing  or  thereafter  constructed,  was  to  be  car¬ 
ried  away  by  the  company  free  of  cost  to  the  city.  It  was 
expressly  stipulated  that  the  company  “  shall  construct,  main¬ 
tain  and  operate  sewers  in  all  public  streets  and  avenues 
designated  by  the  city,  provided  always  that  the  said  sewer 
company  shall  not  be  required  to  sewer  any  part  of  any  street 
or  avenue  where  there  shall  be  less  than  ten  connections  for 
each  consecutive  1,000  feet  of  said  street  or  avenue  to  be 
sewered  ”  unless  the  abutting  landowners  would  guarantee  to 
the  company  this  number  of  connections  and  “  bind  them¬ 
selves  in  legal  form  that  the  required  number  of  sewer  con¬ 
nections  on  the  basis  herein  set  forth  shall  be  immediately 
paid  for  It  was  also  provided  that  the  company  should 
not  be  required  to  sewer  streets  “  except  to  continue  said 
sewers  in  a  continuous  line  from  the  main  sewer  After  the 
expiration  of  five  years,  the  city  was  to  have  the  right  to 
purchase  the  sewer  system  “  for  a  sum  of  money  equal  to  the 
construction  cost  of  said  sewers  and  sewer  works  ”  in  cash. 
But  in  case  of  desire  to  purchase  the  city  had  to  give  six 
months’  written  notice,  to  be  served  between  September  15  and 
December  15  in  any  year.  Sewer  rates  were  to  be  graded 
according  to  •  the  assessed  valuation  of  the  property.  Any 
parcel  of  real  estate  rated  by  the  City  Assessor  at  not  more 
than  $5,000  and  occupied  by  a  private  family  was  not  to  be 
charged  more  than  $10  a  year  for  the  use  of  the  company’s 
sewers.  On  property  assessed  at  a  higher  valuation  the 
annual  rate  was  limited  to  a  maximum  of  two  mills  on  the 
dollar,  which  would  amount  to  the  same  rate  as  $10  on  a 
valuation  of  $5,000.  It  was  provided,  however,  that  “  in  case 
of  double  houses,  blocks  of  buildings,  double  stores,  offices,  or 
any  building  or  apartment  house  or  store  used  by  separate 
and  distinct  families,  tenants  or  occupants  ”,  the  company 
should  have  the  right  to  charge  a  separate  rate  for  each  part 


SEWER  FRANCHISES. 


457 


of  the  building  so  occupied,  and  in  all  cases  where  the  differ¬ 
ent  tenants  or  occupants  were  fitted  up  with  separate  plumb¬ 
ing,  the  company  was  to  make  extra  charges.  It  was  ex¬ 
pressly  stipulated,  however,  that  these  rates  should  not  apply 
“  to  public  buildings,  hotels,  boarding  houses,  public  laun¬ 
dries  and  factories  ”.  So  far  as  these  institutions  were  con¬ 
cerned,  the  company  seems  to  have  been  left  to  establish  rates 
by  contract.  A  license  fee  of  $500  a  year  was  imposed  upon 
the  company  in  return  for  the  rights  and  privileges  granted, 
but  it  was  stipulated  that  this  payment  should  be  credited  on 
the  amount  of  the  franchise  tax  assessed  in  each  year  against 
the  company.  It  was  expressly  provided  that  the  company 
should  not  “  deposit  any  offensive  solid  matters  in  the  At¬ 
lantic  Ocean”  and  that  it  should  not  “  permit  any  refuse  or 
liquid  matters  to  be  deposited  or  emptied  in  any  of  the  water 
courses  within  the  limits  of  the  city  of  Long  Branch  ”.  This 
franchise  was  to  be  of  no  effect  unless  the  company  filed  its 
written  acceptance  within  thirty  days,  together  with  a  bond 
in  the  sum  of  $5,000  to  guarantee  its  faithful  compliance 
with  the  terms  and  conditions  of  the  ordinance.  This  bond 
was  to  be  renewed  every  two  years. 

207.  Extensions  to  be  based  on  reasonable  revenue— 
Austin,  Tex. — The  population  of  Austin  in  1900  was  22,258. 
It  was  next  to  the  largest  city  that  reported  a  private  sewer 
franchise  in  1902.1  This  franchise  was  granted  by  an  ordi¬ 
nance  approved  June  29,  1892,  to  the  Lewis  Mercer  Construc¬ 
tion  Company,  a  New  Jersey  corporation.2  The  grant  carried 
the  right  “  to  construct,  maintain  and  operate  for  the  period 
of  fifty  years  a  system  of  sanitary  sewers  under  the  streets 
and  alleys  of  the  City  of  Austin  ”,  subject  to  the  right  of  the 
city  council  to  determine  on  which  side  of  each  street  and 
alley  the  sewers  should  be  laid.  The  franchise  applied  ex¬ 
pressly  to  all  the  streets  and  alleys  then  existing  or  as  they 
might  thereafter  exist  by  extension.  The  company  was 
authorized  to  lay  “pipes,  conduits  of  brick,  sewers,  manholes, 
catch  basins,  etc.”,  so  far  as  might  be  necessary  to  provide 
an  adequate  sanitary  sewerage  system,  keep  it  in  repair  and 
make  extensions.  The  company  was  required  to  “  exercise 
due  care  and  diligence  in  unnecessary  obstruction  to  public 

1  “The  Municipal  Year  Book,”  1902,  p.  xxxiii. 

9  The  author  secured  a  typewritten  copy  of  this  ordinance  from  the  mayor. 


458 


MUNICIPAL.  FRANCHISES. 


travel  ”  on  the  streets,  or  as  to  “  any  injury  or  unnecessary 
interference  with  any  pipes  either  of  gas  or  water  which  may 
be  lawfully  located  beneath  the  surface  thereof  when  such 
sewers  are  laid The  company  was  also  to  take  “  every 
reasonable  precaution  against  accident  and  danger  to  persons 
or  property  in  the  execution  of  the  rights  and  privileges  ” 
•  granted,  and  was  to  “  cause  all  excavations  to  be  properly 
lighted  and  guarded  at  night  ”,  and  was  to  restore  the  streets 
“to  their  former  condition  as  near  as  may  be  without  un¬ 
necessary  delay Furthermore,  under  the  franchise  the  com¬ 
pany  agreed  to  protect  the  city  from  any  liability  resulting 
from  violation  of  the  company’s  obligations  in  connection 
with  the  opening  of  streets,  or  “by  reason  of  any  failure  to 
maintain  said  sewers  in  proper  repair 

The  general  plan  of  the  sewerage  system  was  described  as 
follows : 

“Sewers  shall  be  of  the  best  quality  of  salt-glazed  terra-cotta  pipe, 
truly  cylindrical  and  laid  upon  a  true  gradient,  -with  joints  laid  tight 
with  first-class  cement  mortar,  or  they  shall  be  made  of  first-class  hard- 
burned  brick  laid  in  first-class  cement  mortar.  Manholes  shall  be  placed 
over  the  sewers  about  500  feet  apart  and  covered  with  approved  cast 
iron  covers  strong  enough  to  carry  the  greatest  and  heaviest  traffic. 
Sewers  are  to  be  laid  at  such  depth  from  the  surface  of  the  streets  as  to 
give  a  fall  of  not  less  than  three  inches  in  ten  feet  from  adjacent  build¬ 
ings.  No  sewer  shall  be  less  than  six  inches  in  diameter,  and  all  sewers 
shall  be  large  enough  to  provide  for  the  easy  flow  of  all  sewerage.” 

It  was  provided  that  no  connection  should  be  made  with 
the  sewer  system  without  a  permit  from  the  company,  and 
that  all  connections  should  be  made  by  the  company  or  under 
its  supervision  and  “  all  charges  for  such  service  shall  be  equal 
and  uniform  99 ,  The  company  was  required  to  file  a  plan 
“  exhibiting  the  location  of  sewers,  manholes,  inspection 
holes,  flush  tanks  and  disinfecting  tanks  ”,  which  had  been 
approved  and  accepted  by  the  city  a  few  days  before  this  fran¬ 
chise  was  granted.  It  was  provided  that  extensions  to  this 
system  might  be  made  either  by  the  order  of  the  city,  or  at 
the  option  of  the  company  subject  to  approval  by  the  coun¬ 
cil  of  the  company’s  plans  and  specifications,  so  far  as  these 
were  not  included  in  the  original  scheme.  It  was  stipulated, 
however,  that  the  company  should  not  “be  required  to  ex¬ 
tend  the  system  to  a  part  that  is  not  at  the  time  sufficiently 
built  up  to  return  reasonable  revenue  ”,  and  that  the  company 
should  “have  reasonable  time  within  which  to  make  all 


SEWER  FRANCHISES. 


459 


reasonable  extensions  required  by  the  city  The  city  coun¬ 
cil  bound  itself  to  pass  ordinances  with  adequate  penalties 
for  the  protection  of  the  company’s  sewer  connections,  catch 
basins,  manholes  and  other  appurtenances.  The  company 
was  authorized  to  assign  its  rights  under  the  ordinance  to  a 
new  sewer  works  corporation  whose  organization  under  the 
laws  of  Texas  it  might  procure.  The  construction  of  the  sys¬ 
tem  was  to  be  commenced  within  three  months  after  the  ac¬ 
ceptance  of  plans  and  to  be  completed  within  one  year  after 
that,  with  the  provision  that  “  if  the  time  as  then  specified  be 
extended  by  floods,  act  of  God  or  public  enemy,  or  for  legal 
proceedings  for  the  maintenance  or  defense  of  their  legal 
rights,  or  in  the  acquisition  of  property  or  rights  of  way,  or 
by  reason  of  any  other  causes  whatever  beyond  their  control, 
such  time  shall  form  no  part  of  the  time  specified  in  this 
ordinance  for  the  performance  of  any  acts  required  by  the 
terms  hereof  to  be  done  by  them 

During  the  construction  of  the  sewers,  the  city  engineer 
was  to  inspect  from  time  to  time  the  work  done  and  the 
materials  used,  and  if  he  found  any  departure  from  the  ac¬ 
cepted  plans  and  specifications  he  was  to  call  the  matter  to 
the  attention  of  the  company  at  once  and  cause  the  work  to  be 
corrected.  In  case  the  company  failed  to  make  the  necessary 
corrections,  the  city  would  have  the  right  “  to  stop  the  con¬ 
struction  of  such  sewers  until  such  specifications  shall  have 
been  conformed  with  When  the  sewer  system  was  com¬ 
pleted,  the  city  engineer  was  to  notify  the  council  officially 
that  the  work  had  been  done  and  the  materials  furnished  in 
conformity  with  the  accepted  specifications,  and  thereupon 
the  council  was  to  pass  an  ordinance  reciting  this  fact  and 
accepting  the  system.  When  this  had  been  done,  the  rights, 
privileges  and  obligations  of  the  ordinance  would  thenceforth 
be  in  full  force  and  effect. 

A  provision  was  inserted  in  the  ordinance  to  the  effect  that 
all  persons  or  property  holders  connecting  their  premises  with 
the  company’s  sewers  should  have  the  privilege  of  furnishing 
all  service  pipes,  and  material  and  labor  required  in  putting 
them  in  position,  “except  actual  contact  with  the  main  sewer 
or  its  branches  ”.  The  exercise  of  this  privilege  was  optional, 
however.  The  city  reserved  the  right  to  connect  any  of  its 
public  buildings  with  the  company’s  system  “  free  of  charge 


460 


MUNICIPAL  FRANCHISES. 


for  sewerage  ”.  The  franchise  was  to  take  effect  upon  its  ac¬ 
ceptance  by  the  company  by  a  written  instrument  “  signed  by 
the  president  of  said  company  and  attested  by  the  proper 
officer  and  sealed  by  its  corporate  seal,  accompanied  by  a  duly 
certified  copy  of  a  resolution  of  the  board  of  directors  of 
said  corporation  authorizing  the  acceptance  of  this  ordi¬ 
nance  Unless  this  instrument  was  filed  with  the  city  clerk 
within  sixty  days  after  the  mayor  had  approved  the  ordinance, 
the  franchise  would  not  go  into  effect. 

208.  A  detailed  schedule  of  rates  and  discounts— Atlantic 
City,  N.  J. — The  largest  town  in  the  United  States  served 
by  a  private  sewerage  system  is  Atlantic  City,  whose  popula¬ 
tion  in  1906  was  estimated  by  the  Census  Bureau  at  39,544. 
The  private  system  was  established  here  at  a  time  when  the 
city’s  water  supply  was  also  in  the  hands  of  a  private  com¬ 
pany.  The  water  works  have  since  been  purchased  by  the 
city,  but  a  new  sewer  franchise  with  advanced  rates  was 
granted  to  the  Atlantic  City  Sewerage  Company  on  December 
30,  1905.1  This  ordinance  recites  that  the  company  had 
succeeded  to  the  rights  and  franchises  of  the  “  Improved 
Sewerage  and  Sewage  Utilization  Company  ”  whose  original 
franchise  had  been  granted  November  12,  1884.  It  is  also 
recited  that — 

“  Whereas  the  great  growth  and  development  of  Atlantic 
City  have  made  demands  upon  the  original  sewerage  system 
which  could  not  have  been  foreseen  at  the  time  of  making 
plans  for  same;  and 

“  Whereas,  it  has  become  necessary,  in  order  that  said 
company  may  meet  the  demands  caused  by  this  growth  and 
development,  to  expend  large  sums  of  money  to  extend  and 
improve  its  system  and  plant;  and 

“  Whereas,  the  present  and  prospective  income  of  the  com¬ 
pany,  based  upon  the  present  rentals,  does  not  justify  the 
expenditure  of  the  sum  of  money  necessary  to  make  the 
proper  extensions  and  improvements;  and 

“  Whereas,  said  company  has  signified  its  desire  to  extend 
and  improve  its  system  and  plant,  provided  the  rentals  be 
slightly  increased  ”■ — therefore,  the  company  is  granted  this 
franchise.  It  was  provided  that  any  changes  in  the  company’s 
system  or  plant  should  be  made  in  a  “  good,  thorough  and 

1  Ordinances,  Atlantic  City,  p.  124. 


SEWER  FRANCHISES. 


461 


workmanlike  manner  ”  and  in  accordance  with  certain  plans 
which  had  already  been  submitted  to  the  city  Board  of  Health 
and  approved  by  it  on  December  8,  1904,  or  in  accordance 
with  other  plans  which  should  be  submitted  and  approved  in 
like  manner  at  some  future  time.  The  company  was  re¬ 
quired  to  “  lay  the  house  sewer  pipes  from  the  mains  to  the 
property  line  whenever  application  for  sewer  service  shall  be 
made  by  owners  or  lessees  ”.  The  company  was  also  required 
at  all  times  to  “  cause  all  sewage  to  be  thoroughly  and  con¬ 
tinuously  removed  through  the  pipes  from  the  limits  of  said 
city  as  rapidly  as  shall  be  necessary  in  order  to  afford  ade¬ 
quate  sewer  service  to  all  parts  of  said  city”.  In  case  any 
sewer  pipes  should  prove  too  small  to  carry  the  sewerage  to  a 
well  or  pumping  station  “  with  proper  rapidity  to  afford  per¬ 
fect  sanitation  ”,  the  company  was  required  to  substitute  other 
pipes  of  greater  and  sufficient  capacity.  It  was  also  stipu¬ 
lated  that  the  company  should  maintain  at  its  well  or  pump¬ 
ing  station  a  smoke  and  stench  stack  of  sufficient  size  and 
height  to  carry  off  all  gases  from  the  well,  such  stack  to  be 
located  and  constructed  so  as  not  to  create  a  nuisance.  The 
company  was  also  required  to  comply  with  any  regulations 
and  pay  any  permit  fees  which  might  from  time  to  time  be 
prescribed  by  ordinance  for  the  opening  of  streets.  Adequate 
sewerage  was  to  be  furnished  for  all  public  buildings,  fire 
houses  and  public  school  houses  free  of  charge. 

In  case  any  patron  of  the  company  should  at  any  time  fall 
in  arrears  on  lawful  sewer  rates  for  a  period  of  thirty  days, 
the  company  was  authorized  to  “  cut  off  all  connections  be¬ 
tween  its  pipes  and  sewers  and  the  pipes  on  the  premises  in 
respect  to  which  said  rates  shall  not  be  paid  ”.  For  a  re¬ 
connection  the  company  was  authorized  to  charge  $8.50  on 
gravel  streets  and  $10  on  paved  streets.  The  company  was 
required  to  make  all  lateral  connections  with  its  main  pipes 
and  was  entitled  to  receive  from  the  owner  or  lessee  of  the 
premises  connected,  the  sum  of  75  cents  per  foot  measured 
from  the  center  of  the  street  to  the  property  line  for  making 
the  connection.  The  owner  or  lessee  of  the  premises  was 
required  to  furnish  and  pay  for  all  necessary  permits  for 
opening  the  streets  for  the  new  connection. 

In  consideration  of  the  increased  rates  authorized  by  this 
ordinance,  the  company  agreed  to  expend  on  improvements 


462 


MUNICIPAL  FRANCHISES. 


and  extensions  other  than  renewals  and  current  repairs  at 
least  $200,000  within  five  years  from  January  1,  1906.  Of 
this  amount,  at  least  $40,000  was  to  be  expended  the  first 
year  and  at  least  $25,000  each  subsequent  year  during  the 
five-year  period,  and  thereafter  the  company  was  to  continue 
to  spend  a  minimum  of  $25,000  a  year  until  it  had  spent 
$400,000  in  all,  or  as  much  more  as  might  be  necessary  to 
carry  the  approved  plans  to  completion.  On  or  before  Febru¬ 
ary  1,  1907,  the  company  was  to  present  to  the  city  comp¬ 
troller  an  itemized  statement  of  its  expenditures  for  im¬ 
provements  and  extensions  during  the  preceding  calendar 
year.  Thereupon  the  city  comptroller  was  to  proceed  to 
audit  and  verify  this  statement  by  an  examination  of  the  com¬ 
pany’s  books,  vouchers,  payrolls  and  records.  Upon  the  com¬ 
pletion  of  this  audit  the  comptroller  was  to  determine  the 
amount  that  the  company  had  actually  expended  in  accordance 
with  the  terms  of  the  ordinance;  the  amount  of  expenditures 
included  in  the  company’s  statement  which  should  not  have 
been  so  included,  and  the  discount  percentage  from  the  stand¬ 
ard  rates  which  the  company  should  be  required  to  make 
during  the  ensuing  year.  The  schedule  of  discounts  provided 
in  the  ordinance  started  off  with  22  per  cent,  but  the  dis¬ 
count  rate  was  to  be  gradually  reduced  1  per  cent  for  every 
$25,000  expended  by  the  company  on  improvements  until  the 
sum  of  $200,000  had  been  spent,  and  thereafter  the  discount 
rate  was  to  be  reduced  1  per  cent  for  every  $50,000  so  spent 
until  it  reached  the  minimum  discount  rate  of  10  per  cent. 
The  comptroller  was  to  submit  his  report  to  the  city  council 
prior  to  the  first  of  April  in  each  year.  This  report  was  to 
be  published  once  a  week  for  two  weeks  in  at  least  two  public 
newspapers.  As  submitted  and  published  it  would  be  con¬ 
clusive  and  binding  both  on  the  city  and  on  the  company  un¬ 
less  one  of  the  parties  should  within  ten  days  except  to  it 
in  writing  specifying  the  disputed  items.  In  that  case,  these 
items  were  to  be  referred  to  three  arbitrators,  one  chosen  by 
each  party  and  the  third  by  the  other  two.  The  decision  of  a 
majority  of  the  arbitrators  would  be  “  final,  conclusive  and 
binding”  on  both  parties. 

In  further  consideration  for  the  increased  rates  authorized 
by  the  ordinance,  the  city  was  to  have  the  right  to  purchase 
the  company’s  sewerage  system,  “  including  its  entire  plant 


SEWER  FRANCHISES. 


463 


and  appurtenances  thereunto  belonging  and  all  the  real  and 
personal  property  of  said  company,  and  its  rights  and  fran¬ 
chises  used  in  connection  with  said  system,  which  entire 
plant  and  appurtenances  shall  be  construed  to  include  the 
plant  and  appurtenances  of  the  said  sewerage  company  as 
now  existing,  allowing  for  proper  future  changes  in  the 
nature  of  renewals  and  repairs,  together  with  all  improve¬ 
ments  and  extensions  which  shall  in  the  future  be  made 
thereto,  and  also  all  other  sewer  plants  in  Atlantic  City  now 
operated  by  said  company  by  virtue  of  ownership,  lease  or 
other  authority.”  The  plant  and  property  of  the  Beach 
Sewerage  and  Improvement  Company  was  specifically  men¬ 
tioned  and  was  to  be  acquired  by  the  grantee  as  a  prior  con¬ 
dition  to  the  enjoyment  of  the  privileges  of  this  franchise. 
The  price  to  be  paid  for  this  other  sewerage  system  was  not 
to  be  chargeable  however  to  the  account  of  improvements 
and  extensions  required  by  the  ordinance  and  for  which  the 
city  was  bound  to  pay  in  case  it  exercised  its  option  of  pur¬ 
chase.  The  going  into  effect  of  the  ordinance  was  also  con¬ 
ditional  upon  the  Beach  Sewerage  and  Improvement  Com¬ 
pany’s  agreeing  in  writing  that  in  case  the  city  purchased 
the  sewerage  system,  the  Beach  company’s  rights,  privileges 
and  franchises  to  carry  on  the  sewerage  business  or  to  lay  or 
maintain  sewer  pipes  in  the  streets  should  be  relinquished 
and  become  void. 

The  city’s  option  of  purchase  was  to  be  exercised  by  an 
ordinance  enacted  on  or  before  December  31,  1920.  It  was 
provided,  however,  that  in  case  the  city  failed  to  exercise 
this  option  within  the  time  prescribed,  such  failure  should 
not  “  in  any  way  prejudice  or  preclude  the  right  of  the  city 
to  acquire  said  plant,  property,  rights  and  franchises  by  con¬ 
demnation  proceedings  or  other  lawful  process  at  any  time 
before  or  after  said  date”.  If  the  city  exercised  its  option, 
the  purchase  price  was  to  be  $75,000  plus  the  amounts  ex¬ 
pended  by  the  company  for  improvements  and  extensions 
after  the  acceptance  of  this  franchise.  It  was  expressly 
understood,  however,  that  the  property  should  be  taken  sub¬ 
ject  to  two  outstanding  mortgages  of  $250,000  each. 

In  making  out  the  bills  for  sewerage  service,  the  company 
was  required  to  state  the  number  of  rooms  and  the  number 
of  fixtures  for  which  charges  were  made,  with  the  rate 


464 


MUNICIPAL  FRANCHISES. 


charged  for  each.  The  maximum  annual  rates  allowed  under 
this  franchise  “  without  rebate  for  or  on  account  of  .discon¬ 
nection  or  non-use  by  owner  or  lessee  of  the  property  for  a 
portion  of  the  year  ”,  but  subject  to  the  discounts  already 
described,  were  fixed  in  detail  as  follows: 

“  For  each  hotel  or  boarding  house,  connected  with  the  sewer, 
seventy-five  cents  for  each  sleeping  room,  not  exceeding  thirty  rooms, 
and  fifty  cents  for  each  sleeping  room  in  excess  of  thirty,  and  an  ad¬ 
ditional  charge  of  fifty  cents  for  each  fixture  connected  with  the  sewer, 
in  such  hotel  or  boarding  house. 

“  All  houses  containing  twenty  sleeping  rooms  or  more  to  be  graded 
as  hotels  or  boarding  houses. 

“  For  each  apartment  house,  boat  house,  cottage,  dwelling,  tenement 
or  office  building,  seventy-five  cents  for  each  room,  not  counting  bath 
or  toilet  rooms,  pantries,  vestibules,  closets,  heater  rooms,  laundries  or 
hallways,  not  exceeding  ten,  and  fifty  cents  for  each  additional  room, 
and  an  additional  charge  of  fifty  cents  for  each  fixture  connected  with 
the  sewer. 

“  For  public  saloons  and  bar  rooms  a  charge  of  eight  dollars  and  an 
additional  charge  of  fifty  cents  for  each  fixture  connected  with  the 
sewer. 

“  For  stores,  for  each  two  thousand  square  feet  of  floor  area  or  frac¬ 
tion  thereof,  four  dollars,  and  an  additional  charge  of  fifty  cents  for 
each  fixture  connected  with  the  sewer. 

“The  word  ‘fixture’  in  all  cases  herein  mentioned,  to  mean  bath¬ 
tub  with  or  without  shower  attachment,  basin,  water-closet,  sink,  slop 
hopper,  urinal,  separate  shower  or  other  bath,  or  laundry  tub  ;  a  two 
part  laundry  tub  to  be  considered  one  fixture,  and  each  additional  part 
to  be  graded  as  a  fixture. 

“  For  buildings  or  plants  not  enumerated  above,  the  company  may 
charge  and  collect  annually  in  advance  for  the  sewer  service  to  be  per¬ 
formed  by  it,  the  following  rates  per  year,  without  rebate  for  or  on 
account  of  disconnection  or  non-use  by  owner  or  lessee  of  the  property 
for  a  portion  of  the  year. 

“Private  school  houses,  having  twenty -five  or  more  scholars,  ten 
dollars  in  addition  to  rate  for  dwelling. 

“Shooting  galleries,  with  target  apparatus  operated  by  running 
water,  five  dollars  in  addition  to  rate  for  store. 

“Steam  plants,  having  blow-off  tanks  connected  with  the  sewer 
(which  tanks  must  be  of  adequate  size  to  prevent  injury  to  sewer  from 
high  temperature  of  waste  water),  ten  cents  for  each  horse  power  con¬ 
nected  with  such  tank,  the  minimum  charge  to  be  ten  dollars. 

“Livery  stable,  two  dollars  for  each  stall  and  fifty  cents  for  each 
fixture  connected  with  sewer  ;  carriage  wash,  fifteen  dollars  additional. 

“  Private  stables,  two  dollars  per  stall,  and  fifty  cents  for  each  fixture 
connected  with  sewer  ;  carriage  wash,  five  dollars  additional. 

“  Banking  rooms,  ten  dollars. 

“Public  bath  houses,  one  dollar  for  each  ten  bath  rooms  or  fraction 
thereof. 

“  Bakeries,  twelve  dollars  in  addition  to  store  rate  for  floor  space  of 
store,  if  any. 

“  Public  restaurants  and  cafes,  (same  rates  as  public  saloons). 


SEWER  FRANCHISES. 


465 


“  Steam  laundries,  forty  dollars. 

“  Hand  laundries,  fifteen  dollars  in  addition  to  store  rate. 

“Dairies,  twelve  dollars. 

“Bottling  houses,  twenty-five  dollars. 

“Sausage  factories,  twenty  dollars,  the  company  to  have  the  right 
to  require  adequate  grease  taps. 

“Fish  and  Oyster  Markets,  fifteen  dollars,  the  company  to  have  the 
right  to  require  adequate  sediment  chamber  to  guard  against  stoppage 
of  pipes. 

“Lumber  mills,  fifteen  dollars  with  fifty  cents  for  each  fixture  con¬ 
nected  with  the  sewer. 

“  Churches,  five  dollars. 

“  Work  shops,  five  dollars,  with  fifty  cents  for  each  fixture  connected 
with  the  sewer. 

“For  each  theatre,  music  hall,  or  merry-go-round,  twenty -five  dollars, 
with  fifty  cents  for  each  fixture  connected  with  the  sewer. 

“  Ice  cream  factories,  twenty  dollars. 

“  Piers,  sixty  dollars,  with  fifty  cents  for  each  fixture  connected  with 
sewer. 

“  Halls  and  lodge  rooms,  five  dollars,  with  fifty  cents  for  each  fixture 
connected  with  the  sewer. 

“Soda  water  stands  and  fountains,  two  dollars  in  addition  to  store 
rate. 

“  Meat  markets,  twenty -five  dollars,  the  company  to  have  the  right 
to  require  adequate  protection  against  stopping  sewer  with  offal. 

“For  all  other  places  and  fixtures  such  rates  as  may  be  agreed  upon 
between  the  company  and  the  owners  or  lessees  of  such  properties,  but 
all  special  rates  or  special  agreements,  shall  be  at  the  opinion  of  said 
company.  Provided,  however,  that  Council  reserves  the  right  to  here¬ 
after  fix  the  rates  on  any  place  or  fixture  not  expressly  enumerated  in 
the  foregoing  provisions.” 


CHAPTER  XV. 

CENTRAL  HEATING  FRANCHISES. 


209.  Extent  of  the  central  heating  busi¬ 

ness  and  its  relation  to  other 
utilities. 

210.  Description  of  a  plant  in  operation. 

—Johnstown,  Pa. 

211.  Regulation  of  rates  by  the  Common 

Council.— Detroit. 

212.  Rates  depending  on  price  of  coal. — 

Kalamazoo. 

218.  Free  heating  for  city  buildings. — 
Columbus,  O. 

214.  Hot  water  and  steam  heating  at 

different  rates. — Salt  Lake  City. 

215.  Steam  for  both  heat  and  power. — 

Seattle. 

216.  Rebates  for  poor  service. — South 

Bend,  Ind. 

217.  A  franchise  good  for  any  kind  of 

heat.— Kansas  City,  Mo. 

218.  Franchise  to  be  construed  as  an 

entirety.— Toledo. 


219.  City  may  purchase  plant  or  license 

a  purchaser.— Indianapolis. 

220.  City’s  option  to  purchase  at  fre¬ 

quent  intervals.— Duluth. 

221.  City  to  be  on  a  par  with  most 

favored  customers. — New  York. 

222.  Steam  heating  and  conduits  com¬ 

bined.— Nashville. 

223.  City  to  receive  for  franchise  2%  per¬ 

cent  of  total  investmennt  in  plant. 
— Newark. 

224.  A  100-year  blanket  franchise  for 

heating,  refrigerating,  gas,  electric 
light  and  power. — Lockport,  N.  Y. 

225.  Steam  heating  and  electric  power 

combined. — A  city  of  15,000  near 
Buffalo. 

226.  Heating,  ventilating  and  regulating 

system  in  connection  with  an 
electric  light  plant.— La  Crosse, 
Wis. 


209.  Extent  of  the  central  heating  business  and  its  rela¬ 
tion  to  other  utilities. — In  1902  commercial  heating  stations 
were  in  existence  in  at  least  130  cities  and  towns  of  the 
United  States.1  Of  122  plants  described  by  the  Municipal 
Year  Book,  82  were  being  operated  in  combination  with  other 
public  utilities,  as  follows :  2 


With  electric  lights . 54 

With  electric  lights  and  gas  works .  8 

With  electric  lights  and  railways .  7 

With  electric  lights  and  water  works .  2 

With  gas  works  and  electric  railways .  6 

With  electric  railways .  2 

With  gas  works. . . .  2 

With  water  works .  1 


It  is  of  interest  to  note  that  heating  plants  were  in  opera¬ 
tion  in  1902  in  only  11  of  the  38  cities  having  a  population 
of  more  than  100,000,  while  a  total  of  52  cities  and  towns, 

1  The  Municipal  Year  Book,  1902,  op.  cit.  p.  xxiii.  *  Ibid.,  p.  xxvi. 

466 


CENTRAL  HEATING  FRANCHISES. 


467 


with  a  population  of  less  than  10,000  each  were  supplied 
with  this  service. 

It  is  said  that  central  steam  heating  has  been  in  continu¬ 
ous  and  successful  operation  since  about  1877,  but  the  public 
generally  knows  comparatively  little  about  this  utility. 
“  Among  the  many  advantages  to  the  consumer  ”,  says  one 
author,1  “  is  the  convenience  of  having  heat  available  in  any 
quantity  at  any  time  of  day  or  night  without  the  care  and 
dirt  which  is  the  accompaniment  of  the  usual  furnace,  per¬ 
fect  service  with  greater  economy,  reduced  fire  risk,  and  a 
gain  in  storage  space  formerly  required  for  coal  and  ashes.” 

Discussing  the  possibility  of  the  development  of  the  cen¬ 
tral  heating  industry,  especially  through  combination  with 
other  utilities,  the  Municipal  Year  Book  said : 2 

“  This  combination  of  electric  service,  whether  lighting  or  railway, 
or  both,  with  central  hot  water  or  steam  heating,  is  of  comparatively 
recent  date,  and  bids  fair  to  be  one  of  the  features  of  municipal  life  in 
the  near  future.  Its  ultimate  success  or  failure,  at  least  as  a  private 
venture,  will,  of  course,  depend  upon  whether  or  not  it  can  be  made 
profitable,  and  this  time  alone  can  prove.  The  most  uncertain  ele¬ 
ments  seem  to  be  depreciation  and  maintenance  charges,  as  opposed  to 
operating  expenses,  and  the  popularity  of  the  service.  The  latter,  of 
course,  will  depend  largely  upon  its  cheapness,  as  compared  with  other 
methods  of  heating,  but  in  communities  made  up  of  well-to  do  residents, 
convenience,  absence  of  coal  dust,  ashes  and  soot  might  be  almost  as 
important  factors  as  cheapness.  This  will  be  particularly  true  where 
soft  coal  is  used,  and  in  such  localities  central  heating  may  become  an 
important  question  of  municipal  policy.  In  the  matter  of  smoke  pre¬ 
vention,  alone,  central  heating  plants  might  proveto  be  of  inestimable 
advantage  to  many  cities." 

While  there  are  no  complete  statistics  available  showing  the 
status  of  the  central  heating  industry  at  the  present  time, 
there  is  reason  to  believe  that  its  expansion  since  1902  has 
been  far  less  rapid  than  the  expansion  in  such  other  public 
utilities  as  telephones  and  electric  light  and  power. 

210.  Description  of  a  plant  in  operation— Johnstown, 
Pa. — An  interesting  description  of  a  central  heating  plant  at 
work  is  given  by  Mr.  James  A.  White  in  “  Central  Station/1* 
The  plant  described  is  that  of  the  Citizens1  Light,  Heat  & 
Power  Company  of  Johnstown,  Pa.  It  is  operated  in  con¬ 
nection  with  the  electric  light  and  power  business.  “  Insula¬ 
tion,  expansion,  anchorage  and  durability  have  each  to  be 

1  James  A.  White,  on  “  Some  Results  of  Steam  Heating  from  a  Central  Station,’ 
published  in  Central  Station  for  May,  1908,  Vol.  7,  p.  880.  2  p.  xxvi. 

*  May,  1908,  Vol.  VII.,  p.  880,  op.  cit. 


468 


MUNICIPAL  FRANCHISES. 


thoroughly  cared  for  ”,  says  Mr.  White.  “  Durability  in  the 
pipe  is  secured  by  strictly  wrought  iron  line  pipe  of  full 
weight.  The  pipe  is  carefully  wrapped  with  asbestos  paper 
held  in  place  by  spirally  wound  copper  wire.  Between  the 
iron  pipe  and  the  wooden  insulating  casing  there  is  a  one- 
inch  annular  air  space,  the  pipe  being  centered  and  supported 
by  roller  and  ball-bearing  chains  which  allow  free  expansion 
and  contraction  with  changes  in  temperature.  The  chief 
insulation  is  secured  by  the  use  of  wood  casing  four  inches  in 
thickness.  This  casing  is  made  up  of  kiln-dried,  tongued 
and  grooved  white  pine  staves,  carefully  selected  60  as  to  be 
free  from  all  imperfections  which  might  affect  its  durability. 
The  inside  of  the  casing  is  lined  with  bright  tin  and  the  out¬ 
side  tightly  wound  with  heavy  galvanized  wire  which  is  bound 
on  under  a  pressure  sufficient  to  deeply  embed  the  wire  into 
the  wood.  To  prevent  decay  the  whole  log  is  covered  with  a 
heavy  coating  of  asphaltum  and  sawdust.  Great  care  is  exer¬ 
cised  when  the  mains  are  installed  to  drain  all  seepage  and 
other  water  away  from  contact  with  the  steam  mains.  For 
this  purpose  three-ply  tar  paper  is  laid  on  the  top  of  the 
casing  to  a  point  below  the  center  line,  and  a  thorough  system 
of  under-drainage  is  secured  by  placing  porous  drain  tile 
below  the  mains  and  piping  same  to  the  sewers  at  convenient 
points.  The  efficiency  of  the  drainage  system  is  greatly  in¬ 
creased  by  placing  the  tile  in  sub-trenches  filled  with  broken 
stone  or  other  porous  material.  This  careful  construction 
results  in  an  insulation  against  loss  of  heat  so  near  perfection 
that  condensation  in  the  street  mains  has  been  reduced  to  an 
average  not  exceeding  five  per  cent  of  the  total  season’s  out¬ 
put,  a  showing  worthy  of  comparison  with  gas  and  electric 
transmission  losses. 

“  A  very  ingenious  device,  known  as  a  ‘Variator’,  is  used 
for  taking  care  of  the  expansion  and  contraction  of  the  pip¬ 
ing.  This  is  a  case  or  frame  securely  anchored  in  a  brick 
box  which  holds  the  outer  edge  of  a  large  annular  corrugated 
copper  disc,  the  inner  edge  of  which  is  connected  to  the  free 
end  of  the  pipe.  As  these  expansion  devices  require  no  pack¬ 
ing  or  other  attention  after  installation,  the  street  is  left  free 
from  man-holes  except  at  the  intersection  of  streets  where 
valves  are  placed.  The  expansion  devices  are  placed  about 
100  feet  apart  with  anchorage  fittings  for  holding  the  station- 


CENTRAL  HEATING  FRANCHISES. 


469 


ary  end  of  the  pipe  placed  midway  between.  Where  slight 
changes  in  grade  are  met  with,  an  adjustable  double  annular 
wedge  is  placed  between  the  anchorage  fitting  and  the  fixed 
end  of  the  pipe.  All  brick  boxes  enclosing  anchorage  and 
expansion  devices  are  filled  with  white  pine  or  other  soft  wood 
shavings  to  prevent  radiation  of  the  heat.” 

The  company  whose  plant  Mr.  White  described  had  13,340 
feet  of  mains  in  operation  and  was  supplying  294  business 
blocks,  residences  and  public  buildings  with  heat.  It  was 
stated  that  the  cost  of  fuel,  water  and  boiler  house  labor  for 
the  company’s  combined  plant  during  the  period  of  twenty- 
six  months  from  November  1,  1905,  to  December  31,  1907, 
was  $52,138.77,  while  the  income  from  steam  heating  during 
the  same  period  was  $62,962.64.  During  the  18  heating 
months  included  in  this  period,  the  income  from  heating 
gave  a  surplus  of  nearly  $20,000  over  the  expenses  mentioned. 
There  was  produced  at  the  same  time  from  the  same  fuel, 
water  and  boiler  house  labor  a  total  of  5,252,347  kilowatts  of 
electricity. 

For  the  purpose  of  measuring  the  amount  of  steam  used  by 
each  of  the  company’s  customers  a  meter  is  installed  which 
collects  and  weighs  the  water  resulting  from  condensation 
on  the  customer’s  premises. 

211.  Regulation  of  rates  by  the  common  council— Detroit.— 

In  1903  two  central  heating  franchises  were  granted  by 
the  City  of  Detroit.  At  the  present  time  both  of  these  grants 
are  held  by  one  company.  By  an  ordinance  approved  August 
15,  1903,  the  city  granted  to  the  Central  Heating  Company, 
its  successors  and  assigns  the  right  to  construct,  extend,  re¬ 
place  and  operate  one  or  more  lines  of  pipes  and  all  the 
necessary  service  pipes,  appliances,  man-holes  and  connec¬ 
tions  in  any  of  the  streets,  alleys  and  public  places  of  the  city 
for  distributing  and  supplying  steam  for  heating  purposes.1 
It  was  provided,  however,  that  the  alleys  should  be  used 
whenever  deemed  practicable  by  the  Commissioner  of  Public 
Works.  The  grant  was  for  a  period  of  thirty  years.  All  of 
the  company’s  pipes  were  to  be  constructed  in  a  substantial 
manner  and  provided  with  standard  improvements  and  ap¬ 
pliances.  All  construction  work,  including  repairs  and  im¬ 
provements,  was  to  be  subject  to  the  inspection  and  approval 

1  Compiled  Ordinances,  City  of  Detroit,  1904,  p.  414. 


470 


MUNICIPAL.  FRANCHISES. 


of  the  Commissioner  of  Public  Works.  The  company  was 
to  occupy  only  such  portions  of  the  streets  and  alleys  as  were 
designated  in  writing  by  the  commissioner.  Upon  notice 
from  the  city  the  company  was  to  change  or  remove,  at  its 
own  expense,  any  of  its  pipes  which  might  interfere  with  the 
construction  of  any  viaduct,  sewer,  public  building  or  other 
public  structure.  The  company  was  forbidden  unnecessarily 
to  disturb  or  interfere  with  any  water  pipe,  sewer  pipe,  gas 
pipe,  conduit,  shade  trees  or  foliage  owned  by  the  city  or  by 
any  authorized  person  or  company.  It  was  provided  that  the 
company  should  not  open  or  encumber  more  of  any  street  or 
alley  at  one  time  than  should  be  necessary  for  the  advan¬ 
tageous  prosecution  of  its  work,  and  a  maximum  limit  of  500 
feet  was  fixed.  The  company  was  required  to  give  a  bond 
to  the  city  in  the  sum  of  $25,000,  and  the  right  was  reserved 
to  the  City  Comptroller  to  require  additional  sureties  or  a 
new  bond  at  any  time  during  the  life  of  the  franchise  when 
he  deemed  such  action  necessary  for  the  protection  of  the 
city’s  interests. 

The  company  was  required  to  deposit  with  the  city  a  repair 
fund  of  $1,000  “to  serve  as  a  continuing  guarantee  that  it 
will  restore  the  streets,  alleys,  avenues  and  public  places  to  a 
condition  equally  as  good  as  before  being  disturbed,  within  a 
reasonable  time  If  the  company  failed  to  make  the  neces¬ 
sary  restoration  after  notice,  then  the  city  could  proceed  to 
do  the  work  and  collect  the  amount  of  its  expense  from  this 
fund.  It  was  provided  that  whenever  the  company  opened  a 
paved  street,  the  refilling  should  be  done  under  the  inspec¬ 
tion  of  the  Commissioner  of  Public  Works,  and  the  replacing 
of  the  pavement  should  be  done  directly  by  the  Commissioner, 
and  the  expense  paid  out  of  the  fund  just  described. 

It  was  expressly  provided  that  the  grant  should  not  be 
considered  an  exclusive  one,  and  that  unless  the  company 
should  begin  construction  within  four  months,  and  within  a 
year  thereafter  have  substantially  completed  a  plant  with 
capacity  sufficient  to  heat  150  buildings,  this  franchise  might 
be  repealed  at  the  option  of  the  Common  Council.  The  usual 
allowance  was  to  be  made,  however,  for  delays  resulting  from 
litigation,  strikes  and  other  causes  outside  of  the  company’s 
control. 

The  right  was  reserved  to  the  Common  Council  to  fix  the 


CENTRAL  HEATING  FRANCHISES. 


471 


company’s  rates  annually  at  the  beginning  of  the  heating 
season,  that  is  to  say,  not  later  than  September  1.  The  fran¬ 
chise  itself  fixed  for  the  first  year  a  maximum  rate  of  65 
cents  “  per  one  thousand  pounds  of  steam  or  condensation  ”. 
As  a  limitation  upon  the  city’s  right  to  regulate  rates,  it  was 
provided  that  a  rate  should  not  be  deemed  reasonable  “  which 
prevents  the  company  earning  an  annual  net  profit  of  10  per 
cent  on  the  capital  actually  invested  The  accounts  of  the 
company,  so  far  as  necessary  for  the  determination  of  the 
cost  of  service  and  the  capital  invested,  were  to  be  open  to 
the  personal  inspection  of  the  City  Comptroller  or  his  repre¬ 
sentative,  and  a  committee  of  the  Council,  when  requested 
by  that  body.  But  no  such  request  could  be  made  and  no  rate 
could  be  fixed  by  the  Common  Council  unless  a  petition, 
signed  by  at  least  20  per  cent  of  the  users  of  the  company’s 
service,  was  first  filed  with  the  City  Clerk  asking  that  the 
rates  be  fixed.  It  was  also  provided  that  the  accounts  in¬ 
spected  by  the  city  authorities  should  not  be  published  and 
that  “  any  report  of  the  City  Comptroller  shall  contain  only 
such  a  general  statement  as  will  show  the  net  return  on  actual 
investment  for  the  then  current  year,  together  with  an  ex¬ 
planation  of  the  basis  of  computation  and  the  exact  manner  in 
which  such  result  has  been  obtained  The  company  was 
required  within  forty-eight  hours  after  demand  of  the  Mayor 
or  Common  Council  to  furnish  a  complete  list,  with  names 
and  addresses,  of  all  the  users  of  its  service. 

It  was  provided  that  the  company  should  extend  its  heating 
system  to  all  parts  of  the  city  on  the  following  conditions : 

“  As  often  as  citizens  desiring  to  receive  the  service  of  said  company 
shall  present  to  it  written  contracts  by  which  they  agree  to  take  and 
receive  from  said  company  heat  furnished  by  it  at  regular  rates  of  said 
company  to  heat  700  cubic  feet  of  space  for  each  foot  of  underground 
street  or  alley  mains  necessary  to  be  constructed  by  such  company,  to 
supply  such  consumers,  such  contracts  to  be  for  the  period  of  three 
years  and  responsible  persons,  said  company  shall  extend  its  mains  and 
furnish  heat  to  such  consumers  as  soon  as  it  can  be  done  with  reason¬ 
able  diligence  and  provided  that  said  company  shall  extend  its  service 
pipes  to  lot  line  free  of  charge  to  the  consumers.” 

The  company  was  given  the  right  to  tap  or  connect  with 
the  sewers  in  the  streets  occupied  by  its  pipes  for  the  purpose 
of  draining  its  steam  pipes,  casings  and  appliances,  and  the 
trenches  in  which  they  were  laid. 

The  company  was  given  the  right  to  establish  rules  and 


472 


MUNICIPAL  FRANCHISES. 


regulations  “  as  to  the  mode,  manner  and  extent  to  which  the 
buildings  of  its  consumers  shall  be  fitted  with  proper  piping, 
radiation  and  apparatus  ”  for  the  distribution  of  heat.  It 
was  provided,  however,  that  no  consumer  should  be  required 
to  install  more  feet  of  radiation  than  necessarv  to  maintain 
72  degrees  temperature  in  his  building,  “  with  steam  at  two 
pounds  pressure  in  zero  weather  ”.  The  company  was  author¬ 
ized  at  all  reasonable  times  to  make  tests  of  steam  pressure 
supplied  by  it  at  any  point  on  the  intake  lines  of  its  con¬ 
sumers.  The  company’s  meters  might  be  removed  by  the 
Commissioner  of  Public  Works  for  testing,  and  the  company 
was  required  to  replace  them  immediately,  for  the  time  re¬ 
quired  for  such  testing.  Any  consumer,  on  paying  the  Com¬ 
missioner  of  Public  Works  a  fee  of  one  dollar,  might  have 
his  meter  inspected,  but  the  company  was  to  be  notified  and 
might  be  represented  by  its  agent  at  the  test.  If  it  was  found 
upon  testing  that  a  meter  registered  inaccurately  to  an  extent 
exceeding  two  per  cent,  the  consumer  was  to  be  reimbursed 
by  the  company  for  the  inspection  fee  of  one  dollar.  In  any 
such  case  the  inspector  was  required  to  mark  the  meter 
“  fast  ”  and  the  company  could  not  use  it  again  until  the 
defect  was  remedied  and  the  meter  again  inspected  and  certi¬ 
fied  to  be  correct.  Every  meter  registering  within  two  per 
cent  of  the  actual  weight  of  water  was  to  be  considered  cor¬ 
rect,  and  sealed.  In  case  the  meter  was  correct,  the  inspec¬ 
tion  fee  paid  by  the  consumer  was  to  be  equally  divided  be¬ 
tween  the  city  and  the  company.  All  the  company’s  meters, 
if  required  by  the  Commissioner  of  Public  Works,  were  to 
be  inspected  and  sealed  by  him  before  they  were  put  into  use. 

The  company  was  required  to  deposit  with  the  city  treas¬ 
urer  $10,000  to  be  held  by  the  city  as  stipulated  damages  and 
to  become  the  property  of  the  city  in  case  the  company  failed 
to  commence  construction  and  prosecute  it  according  to  the 
terms  of  the  franchise;  but  whenever  the  Commissioner  of 
Public  Works  should  certify  that  the  company  had  done  con¬ 
struction  work  requiring  the  expenditure  of  $10,000,  the 
money  would  be  returned  to  the  company.  The  Common 
Council  reserved  the  right  “  to  make  any  reasonable  altera¬ 
tion  or  amendment  to  this  franchise,  affecting  the  question 
of  rates  as  well  as  otherwise ;  and  such  further  rules,  orders 
or  regulations  as  may  from  time  to  time  be  deemed  necessary 


CENTRAL  HEATING  FRANCHISES.  473 

to  protect  the  interest,  safety,  welfare  or  accommodation  of 
the  public  in  relation  to  the  conduct  of  the  business.” 

The  other  heating  franchise  was  granted  about  six  weeks 
later,  September  29,  1903,  to  Simon  J.  Murphy.1  The  terms 
of  this  franchise  were  practically  the  same  as  of  the  one  just 
described,  except  in  two  or  three  particulars.  The  grant  was 
limited  to  the  central  business  district  of  the  city,  and  the 
required  capacity  of  the  plant  was  fixed  at  50  instead  of  150 
buildings.  There  was  also  an  additional  section  providing 
that  the  grantee  should  “  in  the  laying  and  connecting  of  his 
service  pipes  and  afterward  in  the  performance  of  any  work 
connected  with  additions  to  or  maintenance  of  any  part  of 
the  supply  house  or  any  part  of  his  heating  system,  employ 
for  the  performance  of  this  work,  none  but  men  who  are 
members  of  recognized  union  labor  organizations,  whenever 
such  men  are  available  and  competent  ”. 

212.  Rates  depending  on  price  of  coal— Kalamazoo. — An 
omnibus  franchise,  recently  granted  by  the  City  of  Kalama¬ 
zoo,  gave  to  Frank  W.  Armstrong,  his  associates,  successors 
and  assigns,  the  right  to  use  the  streets  of  the  city  for  the 
operation  of  mains,  pipes,  conduits,  etc.,  for  conducting  pro¬ 
ducer  gas,  electricity  and  steam  for  a  period  of  thirty  years.2 
It  was  provided  that  the  grantee  should  restore  to  good  con¬ 
dition  any  street  which  had  been  disturbed  by  him  and  that 
the  City  Council  should  be  “the  sole  judge  of  all  matters 
pertaining  to  the  final  condition  ”  of  any  such  street.  A  cash 
deposit  of  $1,000,  to  be  used  in  paying  for  the  restoration  of 
streets  in  case  the  grantee  should  fail  to  make  the  necessary 
repairs,  was  required.  An  indemnity  bond  of  $15,000  to 
protect  the  city  from  damages  resulting  from  the  exercise  of 
the  franchise  was  also  required.  It  was  provided  that  in  any 
suit  against  the  city  the  grantee  should  be  given  an  oppor¬ 
tunity  to  appeal  or  defend  in  the  litigation.  The  grantee  was 
expressly  forbidden  to  do  injury  to  water  or  gas  pipes  and 
sewers  or  drains,  or  to  endanger  any  shade  tree  in  the  streets. 
The  maximum  rate  for  steam  heat  was  fixed  at  75  cents  per 
one  thousand  pounds  of  steam  or  condensed  steam,  as  meas¬ 
ured  by  a  meter  to  be  furnished  and  maintained  by  the 

1  Compiled  Ordinances,  op.  cit.,  p.  419. 

»  A  copy  of  this  franchise  was  furnished  July  18,  1908,  by  the  City  Attorney  of 
Kalamazoo,  but  without  the  date  of  its  enactment,  which  however  appears  to 
have  been  in  1907,  or  1908. 


474 


MUNICIPAL  FRANCHISES. 


grantee.  It  was  declared  that  this  rate  was  based  upon  the 
then  price  of  coal,  namely,  $2.25  per  ton  delivered  at  Kala¬ 
mazoo  for  Ohio  slack  coal.  “  Should  there  be  any  material 
advance  in  the  price  of  Ohio  slack  coal  ”,  said  the  ordinance, 
“  and  no  other  fuel  is  then  obtainable  that  is  of  equal  value 
for  the  purpose  of  steam  generation  at  practically  the  same 
purchase  unit  cost,  said  grantee  may,  upon  application  to  the 
City  Council,  have  a  proportionately  higher  rate  fixed;  and 
should  there  be  any  subsequent  decrease  in  the  price  of  Ohio 
slack  coal  or  other  obtainable  fuel  of  equal  heat  value,  as 
Ohio  slack  coal,  the  City  Council  may,  at  its  discretion,  make 
a  corresponding  reduction  in  the  price  of  steam  ”.  Whenever 
an  application  by  the  grantee  was  received  for  fixing  a  new 
rate,  the  council  was  to  appoint  a  committee  of  three,  in¬ 
cluding  two  of  its  own  members,  to  hold  public  hearings  on 
the  matter  and  investigate  the  cost  of  fuel.  A  new  rate  could 
be  fixed  only  in  case  this  committee  found  that  the  cost  of 
fuel  had  advanced,  and  such  new  rate  could  be  higher  than 
75  cents  only  in  proportion  to  the  increase  of  fuel  cost. 

The  City  Council  reserved  the  right  to  require  the  exten¬ 
sion  of  the  grantee’s  pipes  and  conduits  “  on  such  streets,  or 
in  such  section  of  the  City  of  Kalamazoo  as  the  said  City 
Council  shall,  from  time  to  time,  deem  necessary  on  giving 
reasonable  notice  ”  to  the  grantee.  The  grantee  was  required 
to  pay  the  city  2  per  cent  of  his  gross  receipts  from  1913  to 
1927,  and  3  per  cent  from  1928  to  the  expiration  of  the 
franchise  period. 

213.  Free  heating  for  city  buildings— Columbus,  0 — 

By  an  ordinance,  approved  April  8,  1901,  the  City  of  Colum¬ 
bus  granted  to  the  Indianola  Land  &  Power  Company  the 
right  to  maintain  pipes,  conduits  and  other  appurtenances  in 
the  streets  il  for  carrying  steam  and  hot  water,  or  either,  for 
supplying  heat  and  power,  or  either,  for  public  and  private 
use,  or  either,  in  the  buildings  and  otherwise  in  said  city  ” ; 
and  for  this  purpose  the  company  was  “  empowered  to  dig 
trenches  and  lay  pipes,  conduits  and  drains  therein;  to  con¬ 
struct  man-holes,  connections  and  other  distributing  appur¬ 
tenances  and  apparatus  underground,  from  time  to  time,  and 
to  do  all  other  things  necessary  ”  to  enable  the  company  suc¬ 
cessfully  to  construct,  maintain  and  operate  its  plant.1  The 


1  Ordinance  No.  18,105. 


CENTRAL  HEATING  FRANCHISES. 


475 


company  was  required  to  use  the  alleys  wherever  practicable, 
and  otherwise  to  lay  its  pipes  under  the  sidewalks.  The  • 
length  of  trench  which  the  company  could  have  uncovered  at 
one  time  was  limited  to  1,000  feet,  and  the  company  was  re¬ 
quired  not  to  injure  or  interfere  with  the  existing  arrange¬ 
ment  of  water  or  gas  pipes,  drains,  6ewers,  ditches  or  other 
public  or  private  works  that  were  lawfully  in  the  streets  at 
the  time  the  company’s  trenches  were  dug,  without  the  con¬ 
sent  of  the  Board  of  Public  Works.  In  any  case  the  com¬ 
pany  was  required  to  compensate  the  owners  of  such  sub¬ 
surface  structures  for  any  injury  done.  Before  making  any 
excavation  for  its  pipes,  the  company  was  required  to  submit 
to  the  Director  of  Public  Improvements  plats  and  plans,  of 
a  uniform  size  designated  by  him,  showing  “  the  full  width 
of  the  public  ways  on  the  route  of  the  proposed  excavations, 
upon  which  shall  be  indicated  all  present  known  or  ascer¬ 
tainable  surface  and  underground  construction,  and  the  loca¬ 
tion  desired  ”  by  the  company.  These  plans  might  be  ap¬ 
proved  or  amended  by  the  director.  After  construction  the 
company  was  required  to  file  with  the  City  Civil  Engineer 
“  plans  and  profiles  on  linen  at  a  suitable  scale  as  may  be 
designated  by  the  said  City  Civil  Engineer,  giving  an  accu¬ 
rate  record  of  the  plan  and  grade  of  construction  of  the 
pipes  and  conduits  of  said  company,  showing  the  location  of 
all  variators,  crosses,  valves  and  man-holes  of  its  lines,  and 
of  street  and  alley  intersectionns,  together  with  a  record  of 
any  underground  construction  which  may  be  uncovered  or 
located  ”  during  the  company’s  construction  work.  These 
records  were  to  be  furnished  to  the  city  within  ninety  days 
after  the  completion  of  the  work  in  any  street  or  alley.  The 
usual  provision  was  made  for  restoring  street  surfaces,  but 
it  was  also  expressly  provided  that  if  within  a  year  after  the 
replacing  of  any  pavement  disturbed  by  the  company,  such 
pavement  should  have  sunk  below  the  level  of  the  surround¬ 
ing  surface,  it  should  be  taken  up  and  relaid  by  the  company. 
An  important  section  of  the  franchise  relating  to  the  com¬ 
pany’s  fixtures  in  the  streets  was  as  follows : 

“  All  pipes,  mains,  covers  to  man-holes,  conduits  and  apparatus  of 
every  kind  used  by  said  company  shall  he  of  the  most  approved 
material,  design  and  quality.  The  upper  surface  of  the  covers  of  all 
man-holes  shall  be  roughly  corrugated.  The  conduits  and  pipes  of  said 
company  shall  be  laid  at  a  depth  of  not  less  than  six  feet  below  the 


476 


MUNICIPAL  FRANCHISES. 


established  grade  of  the  street ;  provided,  however,  that  whenever  it  is 
necessary  or  expedient,  said  company  may,  with  the  consent  of  the 
Board  of  Public  Works,  lay  pipes  at  such  less  depth  as  may  be  fixed 
by  the  Board  of  Public  Works.  The  service  pipes  laid  by  said  com¬ 
pany  shall  not  be  less  than  one  and  one-half  inches  nor  more  than  six 
inches  in  diameter;  the  mains  shall  not  be  less  than  four  inches  nor 
more  than  eighteen  inches  in  diameter ;  provided,  however,  that  larger 
or  smaller  pipes  may  be  used  with  the  consent  of  the  Board  of  Public 
Works.” 

The  company  was  required  to  pay  into  the  street  repair 
fund  the  sum  of  three  cents  per  lineal  foot  of  street  way  in 
which  its  mains  were  laid  until  such  payments  should  aggre-' 
gate  $50,000.  This  was  not  an  annual  payment,  but  was  to 
be  made  only  once  as  the  company’s  mains  were  put  down. 
The  company  was  also  required  to  furnish  the  city  free  of 
charge  sufficient  steam  or  hot  water  for  heating  all  city 
buildings  along  its  pipe  lines,  except  school  and  school  library 
buildings.  The  city  was  to  pay,  however,  the  cost  of  service 
pipes  and  connections. 

The  company  was  limited  to  a  maximum  charge  for  steam 
of  $1.50  “per  thousand  kal  ”,  a  kal  being  defined  as  “one 
pound  of  water  evaporated  into  steam  In  no  case,  however, 
was  the  charge  for  steam  or  hot  water  to  exceed  an  annual 
rate  of  $3.50  per  thousand  cubic  feet  of  space  heated  to 
a  temperature  of  70  degrees,  nor  was  the  charge  for  any  one 
month  to  be  more  than  20  per  cent  of  the  yearly  charge.  It 
was  provided,  however,  that  if  it  should  be  necessary  “to 
carry  steam  or  hot  water  through  service  pipes  exceeding 
fifty  feet  in  length,  an  additional  charge  may  be  made  pro¬ 
portionate  to  the  length  and  size  of  said  service  pipe  to  cover 
loss  by  condensation  of  steam  in  and  radiation  of  heat  from, 
said  pipe  It  was  also  stipulated  that  after  twelve  and  a 
half  years  the  rates  established  in  the  franchise  might  be 
changed  by  ordinance,  but  if  not  changed  at  that  time,  they 
were  to  remain  fixed  to  the  end  of  the  franchise  period,  that 
is  to  say,  for  the  full  term  of  twenty-five  years  from  the  date 
of  the  grant. 

The  company  was  forbidden  to  shut  off  steam  or  hot  water 
from  any  consumer  unless  he  had  “  made  default  for  ten  days 
in  the  payment  of  bills 

At  any  time  after  the  expiration  of  fifteen  years,  and  at 
the  expiration  of  each  succeeding  period  of  five  years,  the  city 
was  to  have  the  right  to  acquire  the  assets  and  property  of 


CENTRAL  HEATING  FRANCHISES. 


477 


the  company  located  within  the  city  limits  at  a  price  to  be 
agreed  upon,  or  if  the  parties  could  not  agree,  to  be  fixed  by 
arbitration.  The  city  was  required,  however,  in  any  case,  to 
give  the  company  one  year’s  written  notice  of  its  intention  to 
purchase,  and  in  case  of  purchase  the  property  was  to  be 
taken  subject  to  all  then  existing  contracts  of  the  company 
made  in  the  usual  and  ordinary  course  of  its  business.  It 
was  expressly  stipulated  that  nothing  in  the  ordinance  should 
prevent  the  city  from  acquiring  the  company’s  property  by 
the  exercise  of  the  right  of  eminent  domain.  The  ordinance 
contained  a  provision  requiring  the  company  to  keep  con¬ 
stantly  on  deposit  with  the  city  treasurer  the  sum  of  $250 
from  which  should  be  taken  the  actual  expense  of  street  work 
done  by  the  city  on  account  of  the  company’s  default.  It  was 
further  provided  that  whenever  the  length  of  street  ways 
occupied  by  the  company’s  pipes  should  exceed  five  miles, 
this  deposit  should  be  increased  at  the  rate  of  $50  for  each 
additional  mile.  The  franchise  was  declared  not  to  be  ex¬ 
clusive.  The  usual  bond  was  required  and  provision  was 
made  for  forfeiture  in  case  the  company  did  not  have  its 
plant  constructed,  ready  for  operation,  within  two  and  one- 
half  years. 

214.  Hot  water  and  steam  heating  at  different  rates. — 
Salt  Lake  City.  — As  long  ago  as  January  11,  1881,  a  franchise 
was  granted  by  the  City  Council  of  Salt  Lake  City  to  the 
Salt  Lake  Power,  Light  &  Heating  Company  for  “  conveying 
steam  by  means  of  pipes  to  be  used  for  heating  and  propelling 
machinery  and  for  other  purposes,  to  the  inhabitants,  prop¬ 
erty  owners  and  users  ”  in  the  city  for  a  term  of  twenty-five 
years.1  This  franchise  also  included  a  grant  for  conveying 
electricity.  The  right  to  lay  steam  pipes  extended  only  to 
certain  specified  streets.  The  pipes  were  not  required  to  be 
laid  more  than  three  feet  underground,  and  they  were  not 
to  be  laid  less  than  four  feet  from  any  gas  or  water  main  or 
service  pipe  except  where  the  pipes  might  cross  each  other. 

On  December  22,  1892,  another  franchise,  authorizing  the 
distribution  of  steam  for  heating,  power  and  other  purposes, 
was  granted  by  Salt  Lake  City.2  This  grant  was  also  for  a 
period  of  twenty-five  years  and  included  gas  and  electric 
lighting.  It  contained  no  important  additional  provisions 

1  Ordinances,  Salt  Lake  City,  op.  cit.,  p.  847.  3  Ibid.,  p.  468. 


478 


MUNICIPAL  FRANCHISES. 


relative  to  steam  heating  except  that  the  pipes  were  not  re¬ 
quired  to  be  placed  farther  than  two  feet  away  from  water 
mains  and  sewers  instead  of  four  feet,  as  in  the  franchise  of 
1881. 

Still  another  franchise  was  granted  by  ordinance,  approved 
September  21,  1905,  conveying  to  the  Citizens’  Heating  & 
Power  Company  the  right  to  use  the  public  streets  for  a 
period  of  fifty  years  “  for  the  distribution  of  steam,  hot  water, 
or  both,  for  heating  or  power  purposes.”1  This  was  an  inde¬ 
pendent  franchise  and  did  not  include  the  right  to  furnish 
any  other  public  utility.  Rates  were  fixed  on  the  basis  of  a 
maximum  charge  of  25  cents  per  season  for  each  square  foot 
of  radiation  furnished  by  the  company  and  heated  by  hot 
water,  or  40  cents  per  foot  of  radiation  heated  by  steam. 
But  the  company  was  “  privileged  to  furnish  such  steam  heat 
to  its  consumers  by  meter  measurement,  in  which  event  the 
rate  charged  by  it  for  steam  99  was  to  be  as  follows : 

For  the  first  4,000  pounds  of  condensation,  $1.50  per  thousand. 

For  each  additional  thousand  pounds,  50  cents  per  thousand. 

But  wherever  the  rates  were  on  a  meter  basis,  a  minimum 
charge  of  $5  was  to  be  allowed. 

It  was  also  provided  that  if  any  practicable  method  of 
measuring  heat  furnished  by  hot  water  should  be  discovered, 
then  the  company  could  use  the  meter  system  for  hot  water 
also.  Its  rates,  however,  were  not  to  exceed  the  equivalent 
of  25  cents  per  square  foot  of  radiation  per  season.  It  was 
set  forth  in  the  ordinance  that  the  company  then  had  a  capi¬ 
talization  of  $2,500,  but  its  capital  stock  was  to  be  increased 
to  $500,000  within  three  months.  The  company  was  required 
to  lay  at  least  four  miles  of  steam  mains  within  a  year  and 
at  least  eight  miles  of  hot  water  mains  within  three  years. 
The  compensation  to  be  paid  the  city  for  the  franchise  was 
fixed  at  one  per  cent  of  gross  receipts  for  the  first  five  years, 
at  one  and  one-half  per  cent  for  the  second  five  years,  and  at 
two  per  cent  thereafter.  The  usual  provisions  were  made  re¬ 
quiring  the  company  to  protect  the  city  against  damages  and 
to  carry  on  its  work  in  the  streets  subject  to  city  supervision. 

215.  Steam  for  both  heat  and  power— Seattle — By  an 
ordinance,  approved  February  19,  1890,  the  City  of  Seattle 
conferred  upon  the  Seattle  Steam  Heat  &  Power  Company 

1  Bill  No.  93,  printed  as  a  separate  leaflet. 


CENTRAL  HEATING  FRANCHISES. 


479 


the  right  to  operate  pipes  “  for  the  purpose  of  conducting 
steam  for  the  heating  of  buildings  and  for  conducting  water 
to  be  used  for  extinguishing  fires  and  as  motive  power  for 
the  operation  of  elevators  and  other  machinery,  and  for  no 
other  purpose  or  purposes  ”  in  the  streets  within  a  certain 
described  district.1  The  grant  was  for  a  period  of  twenty- 
five  years  and  was  not  exclusive,  and  the  company  was  author¬ 
ized  “  to  charge  and  collect  reasonable  compensation  from  all 
persons  and  corporations  to  whom  it  shall  furnish  steam  or 
water  for  any  of  the  purposes  authorized  by  this  ordinance  ”. 

Another  franchise  was  granted  September  25,  1894,  to  the 
Diamond  Ice  &  Storage  Company.2  This  was  also  for  a 
period  of  twenty-five  years  and  included  not  only  steam  and 
hot  water,  but  also  gas  and  electricity  for  heating  and  lighting 
purposes  and  for  motive  power. 

On  March  14,  1902,  another  franchise  similar  to  the  one 
granted  in  1890  was  given  to  the  Seattle  Electric  Company.* 
This  grant  was  to  expire  at  midnight  on  the  31st  day  of 
December,  1934,  and  to  have  no  force  or  effect  thereafter. 
The  company  was  required  to  furnish  service  at  reasonable 
rates.  It  was  also  required  to  supply  steam  for  heating 
municipal  buildings  abutting  on  any  street  or  alley  through 
which  its  mains  might  run  “  at  one-half  of  the  lowest  yearly 
contract  rate  ”  charged  “  to  any  private  consumer  for  similar 
service  In  case  the  franchise  was  assigned  or  mortgaged, 
it  was  provided  that  no  assignment  or  mortgage  should  be 
valid  until  a  copy  of  the  document  had  been  filed  in  the  office 
of  the  city  clerk.  It  was  also  provided  that  the  franchise 
might  be  repealed,  changed  or  modified  by  the  City  Council 
in  case  the  company  did  not  operate  in  accordance  with  its 
provisions. 

Two  or  three  other  franchises  giving  the  right  to  lay  steam 
pipes  in  limited  sections  of  the  City  of  Seattle  have  since 
been  granted.  There  are  no  provisions  of  special  interest  in 
these  later  grants  except  one  in  the  franchise  of  the  Seattle- 
Tacoma  Power  Company,  passed  over  the  mayor’s  veto 
October  8,  1906.4  This  franchise  requires  that  whenever  the 
city  shall  order  any  street  or  alley  within  the  district  covered 
by  the  grant  to  be  permanently  paved,  the  company  “  shall, 
concurrently  with  the  paving  thereof,  if  it  has  not  so  done 

1  Charter  and  Ordinances,  op.  cit .,  p.  423.  *  Ibid L  p.  446.  *  Ibid.,  p.  517. 

•  Ibid.,  p.  615. 


480 


MUNICIPAL  FRANCHISES. 


theretofore,  lay  such  service  pipes  within  the  district  to  be 
paved  as  it  shall  at  any  time  require  ”, 

216.  Rebates  for  poor  service— South  Bend,  Ind. — On 

February  23,  1903,  the  City  Council  of  South  Bend  ratified 
a  franchise  contract  previously  entered  into  by  the  Board  of 
Public  Works  of  the  city  with  the  South  Bend  Heat  &  Power 
Company.1  Under  this  contract  the  company  was  given  the 
right  to  use  the  streets  of  the  city  “  as  bounded  at  any  time 
during  the  life  of  this  grant,  for  the  purpose  of  heating 
water  and  generating  steam,  and  distributing  and  supplying 
hot  water  and  steam,  or  either  thereof,  for  heat  or  power,  or 
either  thereof,  by  means  of  pipes,  conduits  and  appurtenances 
underground  ”  for  a  period  of  forty  years.  The  company 
was  required  to  submit  plans,  maps  and  specifications  of  any 
proposed  construction  for  approval  by  the  Board  of  Public 
Works  prior  to  the  issuance  of  any  permit  to  dig  into  the 
streets.  It  was  stipulated  that  in  case  of  dispute  between  any 
property  owner  and  the  company  as  to  the  location  of  any 
appliances  in  the  street  or  as  to  any  necessary  change  of  loca¬ 
tion,  the  decision  of  the  Board  of  Public  Works  was  to  be 
final.  It  was  stipulated  that  the  tops  of  the  company’s  sub¬ 
surface  structures  should  not  be  less  than  two  feet  below  the 
street  surface.  The  company  was  authorized  to  connect  with 
the  city’s  sewers  for  drainage  purposes,  and  was  required  to 
equip  its  stations  with  “  proper  and  efficient  appliances  for 
the  consumption  and  suppression  of  smoke  from  its  furnaces 
or  heating  apparatus  ”.  It  was  required  to  have  its  plant 
ready  for  operation  within  two  years,  on  pain  of  forfeiture 
of  its  franchise.  It  was  agreed  that  the  annual  rate  to  be 
charged  to  consumers  of  steam  heat  should  not  exceed  35 
cents  per  square  foot  of  radiating  surface  and  that  the  charge 
for  hot  water  heating  should  not  exceed  25  cents  per  square 
foot.  The  radiating  surface  was  to  be  ascertained  “  by 
measuring  the  surface  of  the  radiators  and  pipes  used  by  the 
customers  for  heating”. 

An  interesting  provision  was  made  for  rebates  in  case  of 
inadequate  service. 

“  It  is  agreed  ”,  runs  this  contract,  “  that  any  customers  whose  radia¬ 
tion  is  sufficient  under  the  regulations  of  the  said  company,  and  to 
whom  insufficient  heat  is  applied  to  maintain  uniformly  a  maximum 
temperature  within  the  rooms  where  such  radiation  is  supplied  of  70 

1  Revised  Ordinances,  op.  cit.,  p.  145. 


CENTRAL  HEATING  FRANCHISES. 


481 


degrees  Fahrenheit,  there  should  be  allowed  by  said  company  from  the 
charges  against  such  customer  a  discount  justly  proportioned  to  the  loss 
of  temperature  below  said  maximum,  provided,  however,  that  there 
shall  be  no  charge  against  such  customer  for  such  time  during  the 
months  of  October,  November,  December,  January,  February,  March 
and  April,  when  such  temperature  shall  fall  below  55  degrees  Fahren¬ 
heit;  and,  provided  also,  that  such  discount  shall  not  be  required 
where  the  company  has  not  been  notified  in  writing  of  such  insuffi¬ 
ciency  of  heat,  and  given  an  opportunity  to  discover  the  cause;  and  if 
due  to  the  company’s  service,  to  remedy  the  same ;  nor  shall  it  be  required 
where  the  cause  is  due  to  a  defective  radiation  or  the  violation  of  the 
said  company’s  rules  for  receiving  and  distributing  the  heat,  or  to 
defective  construction  of  the  building,  or  to  any  fault  of  the  consumer.” 

Under  this  franchise  the  company  was  required  to  pay  two 
and  one-half  per  cent  of  its  gross  receipts  for  ten  years  after 
January  1,  1908,  and  after  the  expiration  of  the  ten  years,  5 
per  cent  of  such  receipts.  It  was  provided  that  if  any  doubt 
should  arise  as  to  the  accuracy  of  the  statement  of  gross 
receipts  furnished  by  the  company,  the  City  Comptroller 
should  have  access  to  the  company’s  books  at  the  proper 
business  hours  in  order  to  verify  such  statement. 

217.  A  franchise  good  for  any  kind  of  heat— Kansas 
City,  Mo. — By  an  ordinance,  approved  August  9,  1905,  Kan¬ 
sas  City  granted  a  30-year  franchise  to  three  individuals, 
authorizing  them  “  to  build,  construct,  purchase  and  maintain 
heat  works  for  the  purpose  of  furnishing,  transmitting  and 
selling  heat  and  power  for  public  and  private  use,  and  for  all 
other  purposes  for  which  heat  of  any  character  may  be  used, 
to  such  persons  as  may  desire  to  purchase  the  same  and  to  take 
and  receive  compensation  therefor;  and  for  said  purpose  to 
lay  down  pipes  and  conduits  *  *  *  for  the  conveyance 

of  said  heat,  as  well  as  conduits  for  the  protection  and  in¬ 
sulation  of  said  pipes  and  other  appliances  and  such  man¬ 
holes  therein  for  the  purpose  of  reaching  said  pipes  and  ap¬ 
pliances  and  replacing  and  repairing  the  same  ”,  and  also 
authorized  them  to  lay  down,  protect  and  insulate  lateral  and 
service  pipes  extending  from  their  main  pipes  to  buildings  to 
be  supplied  with  heat  and  power.1  This  grant  was  assigned, 
October  5,  1905,  to  the  Kansas  City  Heating  Company. 

This  franchise  was  to  be  co-terminous  with  “  the  corporate 
limits  of  this  city  as  now  or  hereafter  established  ”.  The  use 
of  the  word  “  heat  ”  was  defined  as  meaning  that  “  the  gran¬ 
tees  may  use  any  method  for  warming  buildings  now  known 

1  Ordinance  No.  29,719  :  Franchise  Ordinances,  etc.,  op.  cit.,  p.  133. 


482 


MUNICIPAL,  FRANCHISES. 


or  that  may  hereafter  be  discovered,  whatever  the  same  may 
be,  whether  steam,  electricity  or  any  other  means  of  heating 
now  known,  or  that  may  hereafter  be  discovered  ”. 

The  rate  to  be  charged  by  the  grantees  was  limited  to  $6 
per  month  “  for  100  feet  of  radiating  surface  supplied  with 
steam  for  warming  building  interiors  ”. 

The  grantees  were  required  to  do  their  street  work  under 
the  supervision  of  the  Board  of  Public  Works,  and  their 
pipes,  conduits,  regulators  and  appliances  were  to  be  located 
as  designated  by  this  board.  Alleys  were  to  be  used  as  far 
as  practicable  and  the  Board  of  Public  Works  was  author¬ 
ized,  in  its  discretion,  to  limit  the  number  of  pipes  to  be  laid 
in  any  street  or  alley.  The  grantees  were  required  to  file  a 
plat  once  a  year  showing  all  the  pipes,  mains  and  appliances 
built  by  them  during  the  twelve  months  immediately  pre¬ 
ceding. 

As  compensation  for  the  franchise  the  grantees  were  re¬ 
quired  to  pay  five  per  cent  of  their  gross  receipts  into  the 
City  Treasury  and  to  submit  their  books  to  examination  by 
the  city  authorities  at  all  reasonable  times,  so  far  as  might 
be  necessary  to  determine  the  correctness  of  the  grantees’ 
statements  of  their  earnings.  The  grantees  agreed  to  spend 
at  last  $100,000,  within  twelve  months  from  the  passage  of 
the  ordinance,  in  laying  down  pipes  for  the  distribution  of 
heat.  This  amount  was  to  be  exclusive  of  their  plant  con¬ 
struction  outside  of  the  street  limits.  They  further  agreed 
thereafter  to  make  such  extensions  of  their  pipe  lines  “  as  a 
reasonable  demand  ”  of  their  business  might  require.  They 
agreed  that  the  type  of  construction  used  should  be  “  the  best 
known  in  the  business  ”,  and  that  their  pipes  should  be  “  thor¬ 
oughly  insulated  in  the  latest  approved  method  so  as  to  pre¬ 
vent  the  radiation  of  heat  from  them  to  the  detriment  or 
injury  of  any  structure  or  construction  in  their  immediate 
vicinity  ”.  This  grant  also  contained  the  usual  provisions  for 
damages,  an  indemnity  bond,  permits  for  opening  streets, 
etc. 

Another  heating  franchise  had  been  granted  by  Kansas 
City  a  few  days  earlier  to  an  individual.1  This  grant  was 
for  a  limited  area.  The  maximum  rate  allowed  was  $7.50 
per  month  i(  per  hundred  feet  of  radiation  supplied  with 


1  Ordinance  No.  29,  720:  Franchises  Ordinances,  etc.,  op.  cit .,  p.  141. 


CENTRAL  HEATING  FRANCHISES. 


483 


steam  at  pressure  not  to  exceed  ten  pounds  per  square  inch 
above  atmosphere  for  the  purpose  of  warming  building  in¬ 
teriors  ”.  The  city  expressly  reserved  to  itself  the  right  to 
own  and  operate  a  plant,  or  plants,  for  supplying  the  city 
or  its  inhabitants  “  with  any  sort  of  heat  A  provision  was 
inserted  forbidding  the  grantee  to  sell  or  lease  his  property 
or  franchise  except  with  the  consent  of  the  city,  evidenced 
by  ordinance,  to  any  other  person  or  company  engaged  in  the 
distribution  and  sale  of  heat,  or  to  enter  into  any  agreement 
with  such  person  or  company  concerning  the  rate  or  price  to 
be  charged  for  heat.  It  was  also  provided  that  “  no  officers, 
employees  or  managers  of  the  plant  and  works,  to  be  con¬ 
structed  and  acquired  under  and  in  pursuance  of  this  ordi¬ 
nance,  shall  at  the  same  time  be  in  charge  of,  or  be  the  offi¬ 
cers,  employees  or  managers  of  any  other  works  authorized 
by  ordinance  to  manufacture  or  sell  heat  in  said  city  The 
grantee  was  authorized,  however,  to  organize  a  corporation 
and  transfer  his  franchise  to  it.  It  was  also  provided  that 
the  grantee  or  the  corporation  organized  by  him  should  have 
complete  and  unqualified  right  to  assign  and  transfer  the 
franchise  and  property  by  way  of  a  mortgage  or  deed  of  trust 
for  the  purpose  of  securing  bona  fide  indebtedness  and  for 
the  purpose  of  acquiring  property  and  raising  funds  for  the 
construction,  equipment  and  operation  of  the  proposed  plant. 
By  the  acceptance  of  the  ordinance  the  grantee  further  bound 
himself  not  to  enter  into  any  pooling  arrangement  or  any 
contract  or  merger  or  consolidation,  “  either  by  wav  of  a  hold¬ 
ing  company  or  otherwise  ”,  with  any  other  company  author¬ 
ized  to  manufacture  or  sell  heat  in  Kansas  City. 

218.  Franchise  to  he  construed  as  an  entirety— Toledo. — 
A  franchise  for  the  distribution  of  hot  water  and  steam  for 
heat  and  power  purposes  by  means  of  pipes  laid  under  a 
particular  street,  was  granted  to  the  Central  Heating  &  Light¬ 
ing  Company  by  the  City  of  Toledo,  September  9,  1907,  for 
a  period  of  twenty-five  years  “  and  no  longer  ’’d  The  city 
reserved  the  right  to  regulate  the  rates  for  heat  or  power  at 
intervals  of  not  less  than  five  years. 

By  another  ordinance  passed  September  30,  1907,  Toledo 
granted  a  general  steam  and  hot  water  franchise  to  the 
People’s  Heat  &  Power  Company.2  This  was  also  a  twenty- 

1  Special  Ordinances,  op.  cit.,  p.  1.  *  Ibid,  p.  3. 


484 


MUNICIPAL  FRANCHISES. 


five-year  grant.  The  company  was  forbidden  to  sell  or  con¬ 
vey  its  franchise  to  any  firm  or  corporation  or  unite  with  any 
other  company  except  the  Yaryan  Light  &  Power  Company. 
Consolidation  with  this  company  was  expressly  permitted. 
The  grantee  or  the  consolidated  company  was  authorized, 
however,  to  execute  a  mortgage  to  get  money  for  construction 
or  maintenance  purposes,  but  in  case  of  foreclosure  the  pur¬ 
chaser  under  any  such  mortgage  was  forbidden  to  consolidate 
with  any  other  company.  The  grantee  or  the  consolidated 
company  was  required  annually,  on  February  6,  to  file  with 
the  city  “  a  full,  complete  and  accurate  report  showing  the 
names  and  addresses  of  each  and  every  person  who  was  a 
holder  on  the  first  day  of  the  preceding  month  of  any  of  the 
capital  stock  of  the  company  filing  such  report,  together  with 
the  number  and  amount  of  shares  held  by  each  of  such 
stockholders  ”. 

Among  the  provisions  of  this  franchise  was  one  requiring 
the  expenditure  of  $100,000  upon  a  plant  or  plants  in  the 
part  of  the  city  east  of  the  Maumee  Eiver,  and  $200,000  in 
the  part  west  of  the  river,  within  two  years.  Permits  for 
opening  streets  for  construction  work  were  to  be  granted  by 
the  Board  of  Public  Service  only  upon  application  by  the 
company  and  presentation  of  a  petition  signed  by  the  owners 
of  75  per  cent  of  the  abutting  property.  Furthermore,  if  the 
proposed  excavations  were  to  be  made  between  the  curb  line 
and  the  lot  line,  the  petition  was  to  be  signed  by  the  owners 
of  60  per  cent  of  the  property  abutting  upon  the  side  of  the 
street  where  the  pipes  were  to  be  laid.  Street  surfaces,  after 
being  broken  into,  were  to  be  replaced  by  the  company  and 
kept  in  repair  to  the  satisfaction  of  the  Board  of  Public 
Service  for  the  period  of  one  year.  The  city  reserved  the 
right  to  fix  the  company’s  rates  at  five-year  intervals.  By 
the  terms  of  the  franchise  the  company  was  required  “  to 
furnish  either  steam  or  hot  water,  or  both,  to  any  and  all 
persons,  firms  or  corporations  within  the  limits  of  the  city  of 
Toledo  who  shall  apply  for  the  same  to  said  company,  provid¬ 
ing  that  the  company’s  pipes,  conduits  or  laterals  are  erected 
or  placed  in  the  same  block  or  portion  of  street  upon  which  the 
property  or  premises  owned  or  leased  by  said  applicant  abuts; 
and,  provided  further,  that  said  company  shall,  at  its  own  ex¬ 
pense,  and  without  cost  to  the  consumer,  construct  its  supply 


CENTRAL  HEATING  FRANCHISES.  485 

pipes  from  its  mains  to  a  point  inside  the  curb  line  of  the 
street 

The  company  was  obligated  to  furnish  steam  or  hot  water, 
or  both,  to  the  City  of  Toledo  and  the  local  school  authorities 
for  public  purposes  “  at  a  cost  not  to  exceed  50  per  centum 
of  the  lowest  price  charged  any  consumer  within  the  City  of 
Toledo  ”,  but  the  right  to  require  service  was  limited  to  build¬ 
ings  within  a  distance  of  1,200  feet  from  the  company’s  pipes 
or  laterals. 

It  was  provided  that  the  ordinance  “  shall  be  at  all  times 
construed  as  an  entirety,  and  if  at  any  time,  at  the  instance  of 
the  company,  or  any  one  for  it,  or  in  its  behalf,  or  on  the  part 
of  any  trustee,  mortgagee,  or  lien-holder  of  the  company,  any 
provision  of  this  ordinance  shall  be  declared  invalid  or  inoper¬ 
ative,  by  any  court,  for  any  reason  whatever,  the  entire  ordi¬ 
nance  and  all  of  its  provisions,  at  the  exclusive  option  of  the 
City  of  Toledo,  shall  be  deemed  invalid,  and  all  the  rights 
hereby  granted  shall  cease  and  determine;  but  the  invalility 
or  illegality  of  either  or  any  of  the  provisions  of  this  ordinance 
shall  not  release  or  discharge  the  company  from  any  obliga¬ 
tions  to  said  city  arising  under  or  growing  out  of  the  rights 
and  privileges  hereby  granted  ”. 

219.  City  may  purchase  plant  or  license  a  purchaser— 
Indianapolis — A  twenty-year  franchise  was  granted,  Decem¬ 
ber  22,  1902,  by  the  city  of  Indianapolis  to  John  E.  Chris¬ 
tian,  authorizing  him  to  furnish  steam  heat  within  a  limited 
area.1  Mr.  Christian  was  required  to  pay  one  dollar  a  year 
for  this  franchise  and  to  charge  not  to  exceed  35  cents  per 
square  foot  of  radiating  surface  for  steam  heat  supplied  to 
private  consumers. 

Another  franchise  was  granted  October  5,  1900,  by  the  city 
of  Indianapolis  to  the  Home  Heating  and  Lighting  Com¬ 
pany.2  This  grant  included  hot  water,  steam  and  electricity. 
The  franchise  was  to  “  follow  the  flag  ”,  that  is  to  say,  it  was 
to  extend  automatically  with  the  growth  of  the  corporate 
limits  of  the  city.  It  was  provided,  however,  that  the  Board 
of  Public  Works  should  select  and  appoint  a  territory  for 
the  company’s  first  plant,  such  territory  not  to  exceed  one 
mile  square  and  to  contain  at  least  800  residence  buildings. 
Within  ninety  days  after  this  territory  had  been  laid  out  the 

l  Laws  and  Ordinances,  op.  cit.,  p.  500.  2  J  bid.,  p.  505. 


486 


MUNICIPAL  FRANCHISES. 


company  was  to  commence  the  construction  of  its  plant  and 
have  it  ready  for  operation  by  September  1,  1901.  It  was 
agreed  that  the  company  should  be  required  “  to  establish 
additional  heating  plants,  or  extend  any  thereof,  only  upon 
the  petition  of  the  owners  of  property  requiring  50,000  square 
feet  of  radiation  or  more  within  a  territory  of  not  more  than 
one-half  of  one  mile  square,  and  who  with  such  petition  shall 
submit  contract  to  become  consumers  of  such  heat  from  said 
company  to  the  extent  of  such  radiation”.  The  maximum 
charge  for  hot  water  heat  was  fixed  at  17  cents  per  square  foot 
of  radiating  surface.  In  case  of  insufficient  service  the  con¬ 
sumers  were  entitled  to  rebates  on  the  same  conditions  as 
those  contained  in  the  South  Bend  franchise  already  de¬ 
scribed.1 

The  company  was  required  to  pay  the  city  five  per  cent  of 
its  gross  receipts,  and  the  franchise  was  granted  for  a  period 
of  twenty-five  years. 

On  March  4,  1902,  the  City  of  Indianapolis  granted  a 
franchise  to  the  Marion  County  Hot  Water  Heating  Com¬ 
pany,  which,  like  the  one  just  described,  included  hot  water, 
steam  and  electricity.2  The  terms  of  this  grant  were  in  most 
respects  similar  to  the  terms  of  the  Home  Heating  and  Light¬ 
ing  Company’s  franchise.  The  provision  in  regard  to  ex¬ 
tensions,  however,  was  simply  to  the  effect  that  after  the  com¬ 
pany  had  put  into  operation  its  first  plant  within  the  territory 
one  mile  square  designated  by  the  Board  of  Public  Works, 
“  additional  territory  may  thereafter  be  occupied,  *  *  *, 

or  the  first  plant  extended  to  additional  territory,  subject  to 
the  terms  and  conditions  of  this  contract ”.  The  principal 
new  provision  in  this  franchise  related  to  the  purchase  of  the 
plant  at  the  expiration  of  the  twenty-five  year  grant.  “  To 
the  end  that  at  the  expiration  of  the  said  period  for  which 
said  grant  is  made,  there  may  no  doubts  exist  as  to  the  respec¬ 
tive  rights  of  the  parties  hereto,  it  is  agreed  ”,  etc.,  runs  the 
contract.  The  substance  of  this  agreement  is  that  if  at  any 
time  not  less  than  three  months  nor  more  than  six  months 
before  the  expiration  of  the  grant  a  new  franchise  shall  not 
have  been  given  to  the  company,  or  its  successors,  then  the 
city  shall  have  the  option  to  purchase  the  tangible  property 


1  See  section  218,  ante. 

2  Laws  and  Ordinances,  op.  cit .,  p.  518. 


CENTRAL  HEATING  FRANCHISES. 


487 


of  the  company  “  at  the  fair  cash  value  of  such  tangible 
property  as  constituting  an  operating  plant  and  system  In 
case  of  disagreement,  the  valuation  is  to  be  fixed  by  three 
arbitrators,  one  to  be  chosen  by  the  mayor,  one  by  the  com¬ 
pany,  and  the  third  by  the  first  two.  The  third  member  of 
the  arbitration  committee  is  to  be  “  a  disinterested  and  repu¬ 
table  expert  electrical  and  mechanical  engineer,  not  residing 
in  the  state  of  Indiana,  and  not,  at  the  time  of  his  selection, 
in  the  employment  of  either  of  the  parties  to  said  contract 

If  within  three  months  of  the  expiration  of  the  original 
grant  the  franchise  has  not  been  renewed  and  the  city  has  not 
exercised  its  option  to  purchase  the  company’s  tangible  prop¬ 
erty,  the  city  may  grant  a  franchise  to  another  company  for 
a  period  commencing  on  the  date  of  the  expiration  of  this 
original  grant.  In  such  case  the  company  securing  the  new 
franchise  shall  have  the  right  to  purchase  the  old  company’s 
tangible  property  upon  the  same  terms  upon  which  the  city 
might  have  purchased  it. 

If  at  the  final  expiration  of  the  original  grant  the  city  has 
not  purchased  the  system,  the  old  franchise  has  not  been  re¬ 
newed  and  the  tangible  property  has  not  been  sold  and  deliv¬ 
ered  to  another  company  having  a  franchise,  then  the  city 
must  proceed  to  offer  by  public  advertisement  a  new  franchise 
for  the  operation  of  the  plant  for  a  term  of  years.  This 
franchise  must  be  “  awarded  to  the  bidder  who,  being  solvent 
and  responsible,  offers  the  most  favorable  terms  for  the  city, 
and  its  citizens,  and  who  will  bind  himself,  themselves  or 
itself,  as  the  case  may  be,  to  take  the  tangible  property 
constituting  said  plant  and  system  and  pay  to  the  corporation 
then  owning  the  same  the  fair  cash  value  thereof,  as  an 
operating  plant 

It  is  expressly  provided  that  in  any  case  the  grantee,  at  the 
expiration  of  this  franchise,  <e  shall  not  have  the  right  to  tear 
up  any  street  or  alley  occupied  by  it  for  the  purpose  of  taking 
up  any  of  the  underground  property  ”  belonging  to  it. 

On  July  29,  1902,  still  another  franchise  was  granted  by 
the  City  of  Indianapolis  to  the  Merchants’  Heat  and  Light 
Company.1  The  terms  of  this  grant  were  similar  to  the  terms 
of  the  franchise  just  described,  except  that  a  maximum 
annual  rate  of  30  cents  per  square  foot  of  radiating  surface 

1  Laws  and  Ordinances,  op.  cit.,  p.  522. 


488 


MUNICIPAL  FRANCHISES. 


for  steam  heat  was  fixed  in  addition  to  the  rate  of  17  cents  for 
hot  water  heat. 

220.  City’s  option  to  purchase  at  frequent  intervals.— 
Duluth. — A  franchise,  without  time  limit,  was  granted  by  the 
City  of  Duluth  May  14,  1890,  to  the  Duluth  Electric  Light 
and  Power  Company  authorizing  the  laying  of  pipes  in  cer¬ 
tain  specified  streets  for  the  purpose  of  supplying  heat  to  the 
buildings  fronting  on  such  streets.1  One  of  the  provisions 
of  this  franchise  was  that  connections  should  be  laid  “  to  the 
curb  of  all  lots  or  parts  of  lots  where  heat  is  to  be  supplied  ” 
at  the  time  when  the  main  pipes  were  laid.  The  franchise 
also  provided  that  the  city  might  purchase  the  company’s  heat 
works  at  any  time  after  the  expiration  of  fifteen  years.  The 
price  to  be  paid  was  to  be  determined  by  arbitration. 
Nothing  was  said  about  payment  for  the  franchise.  It  was 
provided,  however,  that  if  the  city  should  decide,  after  the 
arbitrators  had  made  their  award,  not  to  purchase,  it  could 
not  make  another  proposition  for  purchase  until  the  expira¬ 
tion  of  a  further  period  of  ten  years. 

Another  heating  franchise  for  certain  streets  was  granted 
by  the  city  of  Duluth  by  ordinance  passed  October  20, 
19 02.2  This  grant  was  to  the  Killorin  Construction  Com¬ 
pany  and  was  expressly  limited  in  duration  to  twenty-five 
years.  The  city  reserved  the  right  to  purchase  at  the  expira¬ 
tion  of  ten  years.  If,  after  an  appraisal  by  arbitrators,  the 
city  declined  to  purchase  at  the  sum  fixed,  it  still  would  have 
the  right  to  make  another  proposition  for  purchase  at  the 
expiration  of  a  period  of  two  years  thereafter.  This  right  to 
abandon  a  scheme  for  purchase,  after  arbitration,  and  renew 
it  at  the  end  of  two  years  was  to  continue  throughout  the  life 
of  the  grant.  The  company’s  maximum  annual  rate  for  sup¬ 
plying  heat  was  fixed  at  five  dollars  “  per  thousand  cubic 
feet  of  enclosed  room  heated  The  company  was  authorized, 
however,  at  its  option,  to  insert  meters  or  other  convenient 
devices  into  the  service  pipes  for  determining  the  supply  of 
heat  furnished.  The  company  was  also  authorized  to  shut 
off  the  supply  of  heat  temporarily  for  making  repairs  or 
extensions  to  its  works,  after  giving  due  notice  to  its  consum¬ 
ers  of  its  intention  to  do  so.  The  company  was  not  authorized 

1  Franchises,  city  of  Duluth,  op.  cit p.  262. 

2  Ibid.,  p.  875. 


CENTRAL  HEATING  FRANCHISES.  489 

to  remove  its  pipes  from  the  street  without  a  permit  from  the 
Board  of  Public  Works. 

221.  City  to  be  on  a  par  with  most  favored  customers  — 
New  York. — On  September  7,  1880,  the  Common  Council  of 
the  City  of  New  York  granted  a  franchise  to  the  Prall  New 
York  Heating  Company  to  lay  pipes  in  the  streets  for  con¬ 
veying  hot  water  or  steam  for  heat  or  power.1  One  of  the 
interesting  conditions  of  this  franchise  was  that  the  work  of 
restoring  the  streets  after  excavations,  of  replacing  pavements 
and  of  carting  away  surplus  earth  was  to  be  done  directly  by 
the  Department  of  Public  Works,  but  at  the  expense  of  the 
grantee.  Before  receiving  a  permit  to  open  any  street  the 
company  was  required  to  deposit  with  the  city  a  sum  of  money 
sufficient,  in  the  opinion  of  the  Commissioner  of  Public 
Works,  to  cover  the  cost  of  restoring  the  street  and  keeping 
it  in  repair  for  one  year.  The  Commissioner’s  certificate  of 
such  estimated  cost  was  to  be  final  and  conclusive.  Main 
and  service  pipes  were  to  be  laid  subject  to  regulations  and 
restrictions  established  from  time  to  time  by  the  Commis¬ 
sioner  and  were  to  be  placed  under  such  part  of  the  roadway 
or  sidewalks  as  he  might  prescribe.  Existing  sub-surface 
structures  were  not  to  be  interfered  with  without  the  Commis¬ 
sioner’s  consent,  and  the  company  was  required  to  pay  the  cost 
of  any  such  interference  and  be  liable  for  damages  in  case 
of  injury  to  these  structures.  If  the  prescribed  conditions 
should  not  be  complied  with,  the  Commissioner  was  author¬ 
ized  to  revoke  any  permit  “  in  so  far  as  any  work  authorized 
by  it  may  not  have  been  completed  ”.  The  Commissioner 
was  also  authorized  to  refuse  to  grant  new  permits  until 
all  requirements  under  preceding  permits  had  been  complied 
with.  All  changes  in  the  company’s  pipes  made  necesary 
by  the  construction  of  sewers  or  water  pipes  were  to  be  made 
at  the  company’s  expense,  and  the  pipes  were  to  be  main¬ 
tained  so  as  to  prevent  the  escape  of  water  or  steam  from 
them.  In  case  the  construction  of  the  company’s  steam  pipes 
would  interfere  with  or  pass  through  vaults  or  other  private 
property,  the  consent  of  the  owners  was  required.  Whenever 
a  permit  was  granted  for  laying  its  mains,  the  company  was 
required  to  pay  the  city  20  cents  per  lineal  foot  of  trench. 

1  Compilation  of  Laws  and  Ordinances  relating  to  railroad  and  other  corpora¬ 
tions  in  the  city  of  New  York,  1860  to  1887,  p.  862. 


490 


MUNICIPAL  FRANCHISES. 


For  service  pipes  and  repair  work  the  charge  was  to  be  five 
cents  per  lineal  foot.  The  city  was  to  receive  three  per  cent 
of  the  company’s  gross  receipts.  Hot  water  and  steam  were  to 
be  furnished  to  the  city  and  to  buildings  used  for  city  or  state 
purposes  along  the  lines  of  the  company’s  mains  tor  actual 
cost  plus  ten  per  cent.  It  was  provided,  however,  that  the 
rate  to  the  city  should  be  “  in  no  case  more  than  is  charged 
to  the  most  favored  customer  The  company  was  to  be 
relieved,  however,  from  the  gross  receipts  tax  on  its  earnings 
from  heat  supplied  to  the  city  and  to  public  buildings.  The 
city  reserved  the  right  to  use  any  patented  device  which  the 
company  permitted  anybody  to  use.  The  city  was  not  to  be 
liable  for  any  heat  supplied  to  public  buildings  unless  it  had 
been  furnished  on  the  written  order  of  a  duly  authorized 
officer  or  board.  The  company  was  required  to  pay  the  city 
for  damages,  resulting  from  the  exercise  of  the  franchise, 
where  the  city  was  held  liable,  but  the  city  was  not  to  be 
liable  in  any  case  for  damages  to  the  company’s  fixtures.  A 
bond  of  $50,000  was  to  be  executed  by  the  company  before 
its  operations  were  commenced,  and  the  comptroller  was 
authorized  to  require  other  sureties  or  further  bonds  at  any 
time  when  in  his  judgment  such  requirement  should  be  neces¬ 
sary  to  secure  payment  by  the  company  of  damages  and 
claims.  The  company’s  operations  were  to  be  restricted,  to 
begin  with,  to  a  territory  one  mile  square,  and  the  Com¬ 
missioner  of  Public  Works  was  not  to  grant  permits  for 
extensions  beyond  this  area  until  he  had  satisfied  himself  of 
“  the  public  utility  and  benefit  ”  of  the  company’s  system. 
The  grant  was  to  terminate  at  the  end  of  six  years,  unless  the 
company  had  mains  and  a  plant  ready  to  supply  steam  to 
buildings  on  twenty-five  miles  of  streets. 

On  December  14,  1880,  a  franchise  was  granted  to  the 
Hew  York  Steam  Company  to  lay  mains  and  pipes,  with 
necessary  and  proper  lateral  and  service  pipes,  in  all  streets, 
avenues,  alleys,  squares  and  public  places  “  for  the  purpose 
of  supplying  to  the  city  and  its  inhabitants,  for  motive  power, 
heating,  cooking,  or  other  useful  applications,  steam,  water, 
air,  and  other  fluids,  at  both  high  and  low  pressure,  with 
necessary  return  pipes  ”.1  The  company  also  was  authorized 
to  enter  the  streets  for  the  purpose  of  repairing  and  main- 

1  Compilation,  etc.,  op.  cit .,  p.  3G9. 


CENTRAL  HEATING  FRANCHISES. 


491 


taming  its  pipes  and  for  constructing  man-holes  where  neces¬ 
sary.  The  conditions  of  this  franchise  were  in  several  respects 
different  from  those  of  the  franchise  granted  to  the  Prall 
New  York  Heating  Company.  The  company  was  required  to 
pay  three  cents  per  lineal  foot  of  street  way  in  which  its 
mains  were  laid  up  to  a  total  of  $100,000.  As  a  matter  of 
fact,  the  company  had  prior  to  1906  laid  about  65,000  feet  of 
mains  and  paid  into  the  City  Treasury  about  $2,000  under 
this  franchise.1 

This  company  was  also  required  to  furnish  heat  and  power 
“  for  public  buildings,  hydrants  and  other  ordinary  and  per¬ 
manent  public  purposes  within  the  district  supplied  by  its 
pipes  at  reasonable  prices,  not  exceeding  those  paid  by  its 
most  favored  customer  Before  opening  any  street  the  com¬ 
pany  was  required  to  file  with  the  Department  of  Public 
Works  a  map  showing  “  the  station  or  stations  where  it  is  pro¬ 
posed  to  generate  or  manufacture  the  fluids  to  be  conveyed  in 
the  pipes  to  be  laid  therein,  as  well  as  approximately  the  num¬ 
ber  and  size,  including  coverings,  of  mains  and  laterals  it  is 
proposed  at  that  time  to  lay  in  the  streets  or  places  or  portions 
thereof,  aforesaid  specified,  with  the  location  and  sizes  of  the 
principal  man-holes  and  vaults  Upon  the  filing  of  such  map 
it  was  made  the  duty  of  the  Commissioner  of  Public  Works 
promptly  to  locate  the  proposed  mains  “  in  such  manner  as  to 
be  least  expensive  to  the  company,  and  where  such  mains  will 
be  accessible,  and  out  of  the  way  of  floods,  if  possible,  and 
where  the  foundations  will  not  be  liable  to  disturbance 
It  was  also  provided  that  “when  the  sewers,  water  mains, 
or  other  street  pipes  or  obstructions  controlled  by  the  city,  or 
in  respect  to  which  the  city  has  the  power  of  alteration  or  re¬ 
moval,  obstruct  the  laying  of  the  mains  of  this  company  * 
*  *  so  as  to  prevent  the  laying  of  its  mains  and  pipes  at 

reasonable  expense,  or  seriously  to  impair  their  efficiency,  it 
is  hereby  made  the  duty  of  said  Commissioner  to  rearrange 
such  sewers,  pipes  or  other  obstructions  at  the  request  and 
expense  of  this  company  *  *  *  where  the  same  can  be 

done  without  serious  detriment  to  the  public  interest”. 

The  company  was  required  to  file  tables  from  time  to  time 
showing  the  location  of  its  fixtures  in  the  streets.  Its  street 

1  See  Report  of  the  Bureau  of  Franchises,  Board  of  Estimate  and  Apportion¬ 
ment,  New  York  City,  on  application  of  Seaboard  Refrigeration  Co.,  Feb.  26,  1906, 


492 


MUNICIPAL  FRANCHISES. 


work  was  to  be  done  under  reasonable  regulations  of  the 
Commissioner  of  Public  Works,  as  to  the  safety  of  the  public 
and  as  to  the  times  during  which  public  travel  might  be  inter¬ 
rupted  in  particular  locations. 

There  had  also  been  granted,  on  March  16,  1880,  a  fran¬ 
chise  for  distributing  hot  water  and  steam  for  heat  and 
power,  for  domestic  and  other  purposes,  to  the  United  States 
Heating  and  Power  Company.1  This  company  was  to  fur¬ 
nish  heat  and  power  for  streets  and  public  buildings  at  prices 
to  be  fixed  by  the  Board  of  Estimate  and  Apportionment.  It 
was  also  to  make  an  annual  report  to  the  city,  after  receiving 
which  the  Board,  if  it  deemed  just,  might  impose  a  tax  upon 
the  company  of  three  cents  per  lineal  foot  of  its  mains  and 
two  per  cent  of  the  company’s  net  profits  for  the  year  covered 
by  the  report.  A  year  later  this  grant  was  amended  so  as  to 
make  these  charges  a  definite  obligation  rather  than  depend¬ 
ing  upon  the  action  of  the  Board  of  Estimate  and  Apportion¬ 
ment.2  Under  the  company’s  franchise  its  rights  were  to  be 
forfeited  unless  within  three  years  it  had  ready  and  open  for 
public  use  two  miles  of  mains. 

One  or  two  other  franchises  have  been  granted  at  different 
times  by  the  City  of  New  York.  It  appears,  however,  that 
the  New  York  Steam  Company  has  survived  its  early  rivals, 
possibly  through  the  extraordinary  liberality  of  the  terms  of 
its  franchise.  This  company  now  supplies  a  comparatively 
small  section  in  the  business  district  of  Manhattan  Island. 
Under  the  special  franchise  tax  law  its  franchises  and  pipes 
in  the  streets  were  assessed,  for  the  year  1908,  at  $509,000. 

222.  Steam  heating  and  conduits  combined— Nashville.— 
By  an  ordinance  approved  April  2,  1902,  the  City  of  Nash¬ 
ville  granted  a  fifty-year  license  to  the  Nashville  Street  Steam 
Heating  Company  to  construct  and  operate  a  plant  for  pro¬ 
ducing,  conveying  and  utilizing  “  steam,  hot  air  or  other  heat¬ 
ing  substances,  appliances  or  methods ;  ”  to  “  manufacture, 
sell,  rent  and  supply  heat  for  heating  purposes;”  and  to 
“  purchase,  use,  lay  and  keep  up  pipes  and  conduits  with 
necessary  casings  or  protection  therefor,  and  mains  with  all 
the  necessary  and  proper  attachments,  connections  and  appur¬ 
tenances,  both  above  and  below  the  surface  of  the  streets, 

1  Compilation,  etc.,  op.  cit.,  p.  358. 

1  Ibid.,  p.  374. 


CENTRAL  HEATING  FRANCHISES. 


493 


sidewalks,  alleys,  squares  and  other  public  grounds  and  on 
all  bridges  and  viaducts  in  said  city  of  Nashville  as  the 
boundaries  thereof  are  now  and  as  they  may  hereafter  be 
extended.”1  The  company  was  authorized  to  shut  off  heat 
from  any  consumer  in  arrears  for  a  period  of  ten  days 
for  heat  furnished.  At  any  time  after  twenty-five  years  from 
the  time  when  heat  or  steam  was  first  turned  into  the  com¬ 
pany’s  mains,  the  city,  upon  giving  twelve  months’  notice, 
could  purchase  the  company’s  plant,  appliances  and  property 
at  their  actual  value  as  determined  by  arbitration,  exclusive 
of  the  value  of  the  franchise.  It  was  stipulated,  however,  that 
the  price  to  be  put  upon  the  property  should  not  be  less  than 
the  bonded  indebtedness  of  the  company  “  made  by  it  in  the 
course  of  installation  and  construction  of  its  plant,”  but  it 
was  provided  that  the  company  should  not  have  the  right  to 
bond  its  property  “  beyond  the  actual  cost  of  the  construction 
and  installation  of  its  plant”  on  penalty  of  the  forfeiture  of 
its  franchise.  The  company  was  required  to  employ  none  but 
union  labor  in  the  construction  of  its  shops  and  plant  used 
by  it  in  its  business.  Failure  to  meet  this  requirement  would 
also  result  in  the  forfeiture  of  the  franchise.  It  was  stipu¬ 
lated  in  another  section  that  no  convict  labor  should  be  used 
by  the  company  or  by  any  person  or  company  working  for 
it  “  in  any  part  of  their  work.” 

On  June  12,  1903’,  another  ordinance  of  the  city  of  Nash¬ 
ville  was  approved,  authorizing  this  company  for  a  period 
of  twenty-five  years  “to  sell,  lease  or  rent  any  vacant  or  un¬ 
used  space  or  spaces  in  its  mains  or  conduits  ”  to  any  other 
person  or  corporation  desiring  to  use  such  mains  or  conduits 
“  as  a  receptacle  for  the  placing  or  laying  of  cables,  wires, 
pipes  or  for  any  other  lawful  purpose.”2  The  city  reserved 
the  right  at  any  time  after  ten  years  from  the  commencement 
of  the  company’s  operations  under  this  supplementary  ordi¬ 
nance,  to  purchase  the  company’s  property  and  appliances 
“  connected  with  the  right  and  license  herein  granted,  and 
built  or  constructed  in  pursuance  thereof.”  It  was  stipulated 
that  the  company’s  mains  and  conduits  should  be  constructed 
“  sufficiently  large  and  commodious  to  accommodate  any 
and  all  cables  and  wire  systems  (street  railway  systems  ex- 

1  Laws  of  Nashville,  op.  cit.,  p.  1132. 

*  Ibid.,  p.  1135. 


494 


MUNICIPAL  FRANCHISES. 


cepted)  doing  business  in  the  city  of  Nashville/’  and  further¬ 
more  that  any  company  operating  wires  or  cables  in  the  con¬ 
duct  of  its  business  should  be  permitted  to  place  them  in  this 
company’s  mains  or  conduits  “  for  a  reasonable  charge  or 
compensation.”  The  company  agreed  to  pay  the  city  5%  of 
its  gross  income  from  the  rental  of  its  conduits. 

223.  City  to  receive  for  franchise  2%</0  of  total  investment 
in  plant  — Newark. — By  an  ordinance  approved  June  13, 
1888,  the  city  of  Newark  authorized  the  New  Jersey  Super¬ 
heated  Water  Company  to  lay  pipes  and  conduits  “  for  the 
purposes  only  of  furnishing  heat  and  power  by  means  of 
superheated  water”  in  the  streets  of  a  certain  portion  of  the 
city.1  Pavements  were  to  be  restored,  after  any  streets  had 
been  opened  for  laying  the  company’s  pipes,  to  their  previous 
condition  and  so  maintained  for  a  period  of  three  years.  The 
company’s  pipes  and  conduits  were  to  be  laid  not  less  than 
three  feet  distant  from  the  outside  of  any  water  or  gas  pipes 
already  laid,  except  where  pipes  crossed,  when  they  were  to  be 
separated  a  distance  of  at  least  twelve  inches.  The  city  re¬ 
served  the  right  to  appoint  inspectors  to  supervise  the  com¬ 
pany’s  street  work,  and  these  inspectors  were  to  be  paid  by 
the  company  at  a  rate  to  be  established  by  the  city.  Before 
making  any  use  of  the  streets  the  company  was  required  to 
deliver  to  the  City  Auditor  of  Accounts  a  written  contract 
agreeing  to  pay  to  the  city  “  a  sum  equal  to  two  and  one-half 
per  cent  on  the  capital  actually  used  or  employed  in  the 
business  of  said  company  within  said  city,  and  a  like  sum 
upon  all  additions  thereto,  and  further  contracting  and  agree¬ 
ing  to  abide  by  and  perform  such  rules,  regulations  and 
ordinances  in  relation  to  the  use  of  the  public  streets  as  the 
common  council  may  hereafter  adopt.”  The  company  was 
also  required  to  give  a  bond  in  the  sum  of  $30,000  for  the 
faithful  performance  on  its  part  of  the  terms  of  the  fran¬ 
chise.  It  was  expressly  provided  that  nothing  in  the  section 
requiring  the  2J%  payment  should  be  construed  as  author¬ 
izing  “  the  exemption  from  municipal  taxation  of  any  prop¬ 
erty  whatsoever  of  the  said  company.”  The  franchise  was 
not  transferable  to  any  other  company  except  with  the  per¬ 
mission  of  the  city  and  upon  such  terms  as  the  city  might 
prescribe.  The  company  was  to  be  liable  to  the  city  for  any 

1  Laws  and  Charters,  Newark,  N.  J.  op.  cit .,  p.  768. 


CENTRAL  HEATING  FRANCHISES. 


495 


damage  to  the  streets  caused  by  explosions  or  leakage  of  its 
pipes. 

224.  A  100-year  blanket  franchise  for  heating,  refrigerat¬ 
ing,  gas,  electric  light  and  power— Lockport,  N.  Y. — A 

franchise  was  granted  by  the  city  council  of  Lockport  to  the 
Economy  Light,  Fuel  and  Power  Company  upon  condition 
that  the  company  should  acquire  the  underground  heating 
system  then  in  operation  in  the  city  and  continue  to  operate 
it  “  under  the  grants  of  this  franchise  for  its  term.”1  This 
franchise  was  to  continue  in  force  for  a  period  of  one  hun¬ 
dred  years,  if  the  company  accepted  it  within  thirty  days 
after  its  adoption.  It  gave  the  company  the  right  to  enter 
upon  the  streets  for  the  purpose  of  constructing  and  operat¬ 
ing  “  electric  light,  power,  gas,  steam  heating  and  refriger¬ 
ating  plants  ”  and  for  the  construction  of  all  fixtures  neces¬ 
sary  “  for  the  business  of  supplying  light,  power,  heat  and  re¬ 
frigeration  by  means  of  electricity,  gas,  steam,  hot  water, 
brine,  anhydrous  ammonia  or  other  commodities.”  Before 
proceeding  to  install  any  underground  work,  the  company 
was  required  to  file  with  the  City  Engineer  a  map  showing 
the  location  of  the  work,  and  unless  the  common  council  or 
the  City  Engineer  within  fifteen  days  thereafter  directed  the 
company  to  occupy  some  other  location,  the  company  would 
be  authorized  to  go  ahead  with  its  work  according  to  its 
plans,  as  filed.  Unless  the  company  commenced  to  operate 
its  electric  and  heating  plant  within  one  year  from  the  ac¬ 
ceptance  of  the  ordinance,  that  portion  of  the  franchise  re¬ 
lating  to  electricity  or  heating  would  “  cease  to  be  operative.” 
If  the  company  failed  to  operate  its  gas  or  refrigerating  plants 
within  five  years,  the  portion  of  the  ordinance  relating  to 
gas  and  refrigeration  would  cease  to  be  operative.  It  was  pro¬ 
vided  that  mains  or  pipes  to  supply  gas  and  refrigeration 
should  be  laid  in  the  same  trench.  The  company  was  obli¬ 
gated  to  furnish  light,  heat,  power  and  refrigeration  to  pub¬ 
lic  buildings  owned  by  the  city  and  used  by  it  as  offices,  police 
stations,  fire  department  houses,  water  works  plant  and  city 
hospital  at  rates  10%  less  than  the  company’s  lowest  rates 
charged  to  other  customers.  This  provision  applied,  how¬ 
ever,  only  to  buildings  within  200  feet  of  the  company’s  lines 
of  steam  supply  and  refrigeration,  and  within  600  feet  of  its 

1  Copy  of  this  franchise  without  date  was  furnished  by  the  American  District 
Steam  Co.  of  Lockport,  May  10,  1909. 


496 


MUNICIPAL  FRANCHISES. 


electric  supply  lines.  The  mayor  of  the  city  was  authorized 
to  appoint  an  inspector  at  the  rate  of  $2.50  per  day  to 
supervise  “  refilling  and  repairing  ”  in  all  underground  con¬ 
struction  work  in  the  public  highways,  and  the  company  was 
required  to  pay  the  inspector’s  compensation  upon  presenta¬ 
tion  of  the  bill  approved  by  the  City  Engineer. 

225.  Steam  heating  and  electric  power  combined— A  city 
of  15,000  near  Buffalo. 1 — On  July  16,  1901,  a  franchise  was 
granted  by  a  small  city  in  western  New  York  authorizing  the 
construction,  maintenance  and  operation  in  the  streets  of  the 
city  of  a  system  and  equipment  for  the  purpose  of  furnishing 
steam  and  electric  heat  to  customers  within  the  city.  The 
franchise  included  a  provision  “  for  returning  the  water  from 
such  steam  ”  and  also  for  the  construction  and  maintenance 
of  pole  lines  and  conduits  for  the  purpose  of  furnishing 
electric  power.  The  term  of  the  franchise  was  thirty  years. 
The  grantee  was  not  authorized  to  disturb  the  pavements  in 
the  paved  streets  without  first  getting  special  consent  from 
the  City  Council,  but  in  unpaved  streets,  construction  work 
could  be  carried  on  subject  only  to  the  supervision  and  ap¬ 
proval  of  the  Street  Commissioner.  The  grantee  was  re¬ 
quired  “  at  all  times  so  far  as  possible  ”  to  “  make  use  of 
the  narrow  streets  or  alleys  in  preference  to  the  broader  streets 
or  avenues.”  The  work  of  installing  the  systems  for  the 
supply  of  electric  power  and  underground  steam  heating  was 
to  be  commenced  within  one  year  after  the  acceptance  of  the 
franchise,  and  these  systems  were  to  be  “  constructed  and  in¬ 
stalled  in  any  streets,  lanes  or  alleys  which  are  hereafter 
about  to  be  paved  ”  upon  notice  given  by  the  city  authorities 
and  in  such  manner  as  not  to  interfere  with  the  pavement. 


1  A  copy  of  the  franchise  described  in  this  section  was  furnished  to  the  writer 
by  the  company  operating  under  it  on  condition  that  neither  the  name  of  the 
grantee  nor  the  name  of  the  city  should  appear  in  print,  and  that  the  copy  of 
the  franchise  should  be  returned.  When  the  author,  in  the  process  of  collecting 
data  for  the  preparation  of  this  book,  first  requested  this  company  for  a  copy  of 
its  franchise,  he  was  asked  to  “advise  us  if  you  are  an  exponent  of  Municipal 
Ownership,  and  is  your  work  to  be  a  treatise  on  the  claimed  good  features  of  Mun¬ 
icipal  Ownership?”  Upon  being  assured  that  the  author  was  an  advocate  of 
municipal  ownership  of  water  works  and  sewers,  the  company  supplied  the  fran¬ 
chise  on  the  conditions  already  mentioned.  Far  be  it  from  the  writer  to  violate 
these  conditions,  although  this  franchise  is  presumably  a  public  document.  Fol¬ 
lowing  the  best  precedents  of  general  legislation  established  by  the  Ohio  Legisla¬ 
ture,  I  may  suggest,  however,  that  this  franchise  was  granted  by  a  city  in  the 
State  of  New  York  which  at  the  last  Federal  census  had  a  population  of  not  less 
than  11,600  and  not  more  than  11,625,  and  which  at  the  last  State  census  had  a  popu¬ 
lation  of  not  less  than  15,249  and  not  more  than  15,251.  Following  the  same  general 
method  of  description,  I  may  add  that  the  name  of  the  original  grantee  of  this 
franchise  was  neither  Bummings  nor  Dummings. 


CENTRAL  HEATING  FRANCHISES. 


497 


226.  Heating,  ventilating  and  regulating  system  in  connec¬ 
tion  with  an  electric  light  plant— La  Crosse,  Wise. — By  an 

ordinance  published  May  31,  1899,  the  city  of  La  Crosse 
granted  to  the  Edison  Light  and  Power  Company,  in  addi¬ 
tion  to  the  franchises  which  the  company  had  previously  ac¬ 
quired,  the  right  to  lay  and  maintain  pipes  in  the  streets  of 
the  city  for  the  purpose  of  conveying,  carrying,  and  passing, 
by  any  method  which  said  company  may  choose  to  adopt, 
steam,  hot  water,  liquid  air,  compressed  air,  or  air  in  any  form, 
or  any  other  heating  compound,  or  substance  for  heating  and 
ventilating  and  regulating  purposes,  or  for  any  other  purpose 
or  purposes  whatsoever  connected  with  heating  and  ventilat¬ 
ing  and  regulating.”1  This  grant  was  for  a  period  of  thirty 
years. 

By  an  ordinance  published  Nov.  29,  1901,  the  company 
secured  an  extension  of  its  electric  light  privileges  for  a 
period  of  twenty-five  years.2  It  was  ordained  as  a  part  of 
this  grant  that  the  price  charged  to  private  consumers  for 
heat  should  not,  during  the  life  of  the  renewal  electric  light 
franchise,  exceed  the  amount  charged  by  the  company  at  the 
time  when  the  franchise  was  passed.  It  was  also  ordained 
that  the  price  for  heat  should  at  all  times  be  a  “  reasonable 
charge  for  such  service.”  It  was  expressly  provided  in  this 
ordinance  that  wherever  the  term  “  reasonable  charge  for 
such  service  ”  occurred,  ct  it  shall  be  left  with  the  courts,  in 
case  of  complaint  by  customers,  to  determine  whether  or  not 
the  rates  charged  are  reasonable,”  and  “  the  courts  shall  have 
power  to  fix  the  rates  if  they  are  determined  to  be  unreason¬ 
able  or  unjust.” 

1  Ordinances  of  the  City  of  La  Crosse,  Wise.,  1903,  p.  4. 

2  Ibid,.,  p.  63. 


CHAPTER  XVI. 

REFRIGERATION  FRANCHISES. 


227.  Pipe  line  refrigeration. 


230.  Rates  to  be  regulated  by  the  munici¬ 
pality. — Kansas  City,  Mo. 


228.  Franchises  for  restricted  areas. — 
New  York  City. 


231.  Extensions  to  earn  8  per  cent. — 
Wichita,  Ks. 


229.  Plant  may  be  purchased  at  expira¬ 
tion  of  grant. — Baltimore. 


232.  Regulation  of  street  work.— Seattle. 


227-  Pipeline  refrigeration. — The  distribution  of  cold  by 
means  of  pipes  in  the  streets  for  cold  storage  plants,  cham¬ 
bers  in  hotels  and  apartment  houses,  restaurants  and  the 
shops  of  a  few  small  dealers,  is  in  practical  operation  in 
several  American  cities.1  It  is  claimed  that  the  production 
of  refrigeration  in  smaller  units  than  about  500  pounds  per 
day  is  not  efficient  from  an  economic  standpoint.  Eive  hun¬ 
dred  pounds  of  refrigeration  is  equivalent  to  the  cold  pro¬ 
duced  by  the  melting  of  500  pounds  of  ice.  Refrigerating 
systems  varying  in  length  from  one  mile  to  seventeen  miles 
are  in  use  in  Boston,  New  York,  St.  Louis,  Atlantic  City, 
Baltimore,  Norfolk,  Los  Angeles,  and  Kansas  City,  Mo. 
A  refrigeration  plant  once  established  in  Denver  has  been 
discontinued. 

There  are  two  principal  methods  of  pipe  line  refrigeration 
in  use.  One  is  by  the  circulation  of  brine  or  cold  salt  wrater. 
This  system  is  used  in  Boston,  New  York  and  Philadelphia. 
The  other  system  produces  refrigeration  by  forcing  ammonia 
at  high  pressure  through  the  pipes  and  permitting  it  to  expand 
in  the  service  boxes.2  The  ammonia  system  is  in  use  in 
Boston  and  New  York  and  in  all  the  other  cities  mentioned  ex¬ 
cepting  Philadelphia.  The  Boston  plant  cools  about  600 
boxes  with  1,500,000  cubic  feet  of  space.  In  Norwich,  Conn., 
there  is  said  to  be  a  compressed  air  plant  that  supplies  refrig¬ 
eration  to  the  whole  town  through  a  system  of  mains. 

1  See  article  on  “  Pipe  Line  Refrigeration,”  by  Jos.  H.  Hart,  published  in  En¬ 
gineering  Magazine  for  June,  1908,  Vol.  85,  p.  412. 

*  See  address  on  “  Pipe  Line  Refrigeration,”  by  J.  E  Starr,  published  in  En¬ 
gineering  News,  vol.  54,  p.  640.  This  address  was  delivered  December  4,  1905, 
before  the  American  Society  of  Refrigerating  Engineers  at  New  York  City. 


498 


REFRIGERATION  FRANCHISES. 


499 


228.  Franchises  for  restricted  areas— New  York  City.— 

Refrigerating  plants  in  New  York  City  have  been  established 
in  several  places.  In  1890  applications  were  made  by  five 
companies  and  one  individual  for  the  privilege  of  furnishing 
refrigeration  to  the  West  Washington  Market  in  the  present 
Borough  of  Manhattan.1  Four  of  these  applicants  proposed 
to  circulate  cold  salt  water  through  pipes  to  the  refrigerating 
boxes  of  the  standholders  at  the  market.  The  other  applicants 
proposed  to  use  the  ammonia  system.  The  right  applied  for 
was  sold  at  auction  to  the  New  York  Refrigerating  Construc¬ 
tion  Company  and  a  contract  was  entered  into  for  a  term  of 
ten  years  under  which  the  company  agreed  to  pay  the  city 
$5,500  annually  and  5%  of  its  gross  receipts,  and  stipulated 
that  its  monthly  charge  to  standholders  at  the  market  should 
not  exceed  three  cents  per  cubic  foot  of  the  space  supplied 
with  refrigeration.  This  company  made  a  financial  failure 
and  its  contract  with  the  city  was  cancelled  in  1893. 

By  resolution  of  the  Board  of  Aldermen  approved  April  8, 
1890,  the  privilege  was  granted  to  the  Greenwich  Refrigera¬ 
tion  Company  to  lay  two  pipes  not  more  than  six  inches  in 
diameter  under  the  surface  of  certain  streets  in  lower  Man¬ 
hattan,  in  the  vicinity  of  the  Gansevoort  market.2  The  com¬ 
pany  was  aifthorized  to  conduct  salt  water  for  refrigerating 
purposes  through  its  pipes  on  condition  that  it  should  enter 
into  a  stipulation  with  the  Commissioner  of  Public  Works  to 
save  the  city  harmless  from  damages  to  sewer,  gas  or  water 
pipes  and  from  any  other  damages  resulting  from  the  exer¬ 
cise  of  the  franchise.  This  company’s  rights  were  later  trans¬ 
ferred  to  the  Manhattan  Refrigerating  Company  which  has 
in  operation  the  principal  refrigerating  plant  now  in  exis¬ 
tence  in  New  York  City.  The  assessed  value  of  this  com¬ 
pany’s  franchise  and  fixtures  in  the  streets  for  the  year  1908 
was  $40,000. 

In  1908  the  City  of  New  York  granted  a  franchise  to  the 
Seaboard  Refrigeration  Company  for  the  purpose  of  main¬ 
taining  and  operating  a  plant  at  Coney  Island.  This  fran¬ 
chise  was  granted  under  the  terms  of  the  revised  charter  of 
Greater  New  York  and  according  to  the  standard  form  of 

1  Report  of  the  Bureau  of  Franchises  on  the  application  of  the  Seaboard  Refri¬ 
geration  Co.,  Feb.  26, 1906,  op.  cit.,  p.  5. 

2  Report  of  Bureau  of  Franchises  upon  the  application  of  the  Manhattan 
Refrigerating  Co.,  April  16, 1906,  p.  4. 


500 


MUNICIPAL  FRANCHISES. 


contract  now  _n  use  by  the  Board  of  Estimate  and  Appor¬ 
tionment.  This  franchise  provided  that  the  company’s  con¬ 
duits  should  not  exceed  eighteen  inches  in  diameter  and 
should  be  used  for  the  sole  purpose  of  supplying  refrigera¬ 
tion.  The  franchise  was  granted  for  a  term  of  fifteen  years 
with  the  privilege  of  renewal  by  the  company  for  a  further 
period  of  ten  years  upon  a  fair  readjustment  of  the  value  of 
the  grant,  to  be  made  either  by  agreement  or  by  appraisal. 
It  was  provided  that  upon  the  final  termination  of  the  fran¬ 
chise  for  any  cause,  the  company’s  conduit  lines  and  their 
appurtenances  constructed  pursuant  to  the  company’s  con¬ 
tract  with  the  city  should  revert  to  the  city  without  compen¬ 
sation.  Engineer  Nichols,  in  reporting  on  this  franchise, 
stated  that  the  company  expected  to  start  with  gross  earnings 
of  $17,000  a  year.  The  compensation  to  be  paid  by  the 
company  for  the  franchise  was  fixed  at  a  lump  sum  of  $5,000 
to  be  paid  at  the  start,  and  from  four  to  six  per  cent  of  its 
gross  receipts  with  minimum  annual  sums  during  the  original 
period  covered  by  the  grant.  The  company  was  also  required 
to  pay  annually  ten  cents  for  each  linear  foot  of  conduit  line 
laid  during  the  year,  and  $2  for  each  man-hole  constructed. 
It  was  expressly  provided  that  the  terms  and  conditions  of 
this  franchise  should  be  binding  throughout  the  period  of 
the  grant,  no  matter  to  whom  the  franchise  might  be  trans¬ 
ferred.  It  was  also  provided  that  the  franchise  could  not  be 
assigned  in  any  manner  without  the  consent  of  the  city.  A 
provision  was  made  to  the  effect  that  the  company  should 
forfeit  its  franchise  “  without  judicial  or  other  proceedings  ” 
unless  it  had  at  least  fifty  per  cent  of  its  conduit  line  con¬ 
structed  and  in  operation  by  May  1,  1911.  The  company  was 
required  to  keep  the  pavements,  damaged  by  it,  in  repair  for 
one  year  after  they  had  been  replaced,  and  to  pay  the  city 
the  cost  of  the  inspection  of  the  work.  It  was  stipulated  that 
before  the  company’s  pipes  should  be  used  for  the  conveyance 
of  gas  or  fluid  under  pressure  for  refrigerating  purposes  they 
should  be  submitted  to  a  pressure  of  450  pounds  per  square 
inch  to  test  their  strength.  It  was  also  stipulated  that  the 
company  should  not  charge  its  consumers  more  than  $3.50 
for  the  same  amount  of  refrigeration  which  is  produced  by 
one  ton  of  ice.  The  city  reserved  the  right  by  the  Board 
of  Estimate  and  Apportionment  to  regulate  from  time  to 


REFRIGERATION  FRANCHISES. 


501 


time  the  maximum  and  minimum  rates  to  be  charged  by  the 
company  “  provided  that  such  rates  shall  be  reasonable  and 
fair.”  The  company  agreed  to  furnish  the  city  free  of  cost 
all  refrigeration  needed  for  public  purposes  along  the  com¬ 
pany’s  routes.  The  company  also  agreed  to  furnish  refrig¬ 
eration  to  any  applicant  whose  premises  were  located  along 
the  company’s  routes.  Any  dispute  between  the  company 
and  a  consumer  as  to  the  fairness  and  reasonableness  of  the 
company’s  regulations  contained  in  its  contracts  was  to  be 
subject  to  a  decision  of  the  Board  of  Estimate  on  the  appli¬ 
cation  of  either  party.  The  company  was  required  to  furnish 
maps  showing  the  exact  location  of  its  conduit  lines  and  man¬ 
holes.  The  franchise  was  declared  not  to  be  exclusive.  The 
company  was  required  to  assume  all  liabilities  for  damages 
on  account  of  the  exercise  of  its  franchise.  The  company 
also  agreed  that  its  conduit  lines  should  be  used  only  by 
itself  and  for  no  other  purpose  than  supplying  refrigeration 
by  the  ammonia  process  or  such  other  process  as  the  Board  of 
Estimate  might  consent  to.  The  issue  of  additional  stock 
or  bonds  by  the  company  was  to  be  dependent  upon  a  certifi¬ 
cate  of  authority  granted  by  the  Board  of  Estimate.  For  the 
purpose  of  determining  the  amount  of  stock  and  bonds  to  be 
issued,  the  Board  was  authorized  to  take  testimony,  to  ex¬ 
amine  the  company’s  books  and  to  require  verified  statements 
from  the  company’s  officers  pertaining  to  the  value  of  its 
property  and  franchises.  The  board  was  required,  however, 
to  make  its  determination  in  regard  to  the  issue  of  stocks 
or  bonds  within  sixty  days  after  the  final  submission  of  papers 
or  the  final  hearing  on  the  company’s  application.  Provision 
was  made  that  the  company  should  make  an  annual  report 
to  the  Board  including  a  statement  of  its  financial  operations 
and  assets.  The  city  required  the  company  to  deposit  a  fund 
of  $5,000  as  security  for  the  fulfilment  of  the  terms  of  the 
franchise.  The  penalties  for  inefficient  service,  for  failure  to 
make  its  annual  report  and  for  neglect  of  street  repairs  and 
other  delinquencies,  were  to  be  collected  out  of  this  fund  and 
the  company  was  required  immediately  thereafter  to  restore 
the  fund  to  the  full  amount  of  $5,000,  or  in  default  of 
doing  so  to  be  liable  to  the  forfeiture  of  its  franchise  at  the 
discretion  of  the  city  comptroller.  Apparently,  the  Sea¬ 
board  Refrigeration  Company  found  difficulty  in  carrying  out 


502 


MUNICIPAL,  FRANCHISES. 


its  plans  under  this  franchise,  for  it  afterwards  secured  an 
extension  of  time  on  two  different  occasions,  and  in  1908  it 
did  not  appear  on  the  special  franchise  assessment  roll  as  the 
owner  of  franchises  or  fixtures  of  value  in  the  streets. 

A  similar  franchise  was  granted  by  the  city  of  New  York 
at  about  the  same  time  to  the  Kings  County  Kefrigerating 
Company  for  the  purpose  of  Supplying  refrigeration  to  the 
Wallabout  Market  in  Brooklyn.1  This  company  anticipated 
gross  receipts  of  $15,000  a  year.  It  was  charged  for  its 
franchise  $500  in  cash;  and  from  five  to  seven  per  cent  of  its 
gross  receipts  for  the  term  of  its  grant;  25  cents  per  foot  of 
conduit  laid  in  the  streets  and  $2  for  each  manhole  con¬ 
structed.  This  company  proposed  to  charge  for  refrigeration 
not  by  the  ton  but  by  the  cubical  contents  of  the  refrigerating 
boxes.  It  proposed  a  rate  of  10  cents  per  foot  for  rooms  hav¬ 
ing  less  than  1000  cubic  feet;  7  cents  per  foot  for  rooms 
having  from  1,000  to  10,000  cubic  feet  and  5  cents  per  cubic 
foot  for  rooms  of  more  than  10,000  cubic  feet.  Its  rates  were 
not  definitely  fixed  in  its  franchise,  but  the  right  was  reserved 
to  the  city  to  regulate  them  at  any  time. 

229.  Plant  may  be  purchased  at  expiration  of  grant— 
Baltimore. — On  December  12,  1901,  an  ordinance  was  passed 
by  the  city  of  Baltimore  granting  to  two  individuals  the  right 
to  construct  and  operate  “  subways  and  pipe  lines,  including 
the  necessary  and  convenient  boxing,  pipes,  manholes  and 
other  appurtenances  ”  under  the  streets  of  the  city  within  a 
certain  designated  district  or  under  such  other  streets  con¬ 
tiguous  to  this  district  as  might  be  designated  at  a  later  time 
by  the  Board  of  Estimates.2  The  pipes  were  to  be  used  “  for 
the  purpose  of  transmitting  refrigeration  or  heat,  or  both  re¬ 
frigeration  and  heat.”  The  Board  of  Estimates  was  author¬ 
ized  to  extend  the  territorial  privileges  of  the  grantees  from 
time  to  time  as  the  Board  might  deem  to  be  proper  and  ex¬ 
pedient.  All  streets  disturbed  by  the  grantees  were  to  be 
restored  to  their  former  condition  and  the  paving  kept  in 
repair  for  a  period  of  two  years.  If  at  any  time  the  pipes 
were  not  used  for  a  period  of  six  months  the  grantees  might 
be  required  to  remove  them  at  their  own  expense  upon  sixty 
days’  notice  from  the  mayor  and  city  engineer.  It  was  ex- 

1  Sea  Report  of  the  Bureau  of  Franchises,  March  21,  1906. 

*  Public  Service  Corporations  of  Baltimore,  compiled  by  Charles  Pielert,  1908,  p. 
705. 


REFRIGERATION  FRANCHISES. 


503 


pressly  provided  that  the  grantees  should  be  at  all  times  sub¬ 
ject  to  “  such  licenses,  taxes,  assessments  and  charges,  as  may 
be  duly  and  lawfully  imposed  upon  them,  and  all  others,  if 
any,  who  shall  or  may  be  engaged  in  the  business  of  supplying 
refrigeration  and  heat,  or  either,  and  for  that  purpose  be  us¬ 
ing  the  streets,  lanes  and  alleys  of  the  city.”  It  was  provided 
that  the  subways  and  pipe  lines  should  be  laid  at  least  two 
feet  below  the  surface  of  the  streets  and  that  the  conduits 
containing  the  refrigerating  and  heating  pipes  should  not  be 
of  a  greater  diameter  than  24  inches.  The  grant  wras  declared 
not  to  be  exclusive;  plans  were  to  be  filed  with  the  city 
engineer  before  the  commencement  of  work ;  the  streets  were 
not  to  be  excavated  or  encumbered  for  an  unreasonable  time 
or  to  an  unreasonable  extent  and  the  work  was  to  be  done 
under  the  direction  of  the  city  authorities.  The  grantees 
were  required  to  begin  operation  and  supply  refrigeration 
and  heat,  or  either,  to  their  customers  wfithin  eighteen  months 
after  the  passage  of  the  ordinance.  They  were  required  upon 
notification  by  the  proper  city  official  to  remove  any  of  their 
subways  or  pipe  lines  so  as  not  to  interfere  with  the  repair  or 
construction  of  sewers,  water  pipes  or  other  municipal  im¬ 
provements  in  the  streets.  They  were  required  to  furnish 
two  bonds  of  $10,000  each,  one  to  indemnify  the  city  against 
damages,  and  the  other  to  guarantee  the  faithful  performance 
of  the  conditions  of  the  franchise.  An  annual  tax  of  $250 
per  lineal  mile  of  pipe  or  subway,  exclusive  of  house  connec¬ 
tions,  was  imposed  as  compensation  for  the  franchise.  The 
period  of  the  grant  was  fixed  at  twenty-five  years.  It  was 
provided  that  the  grantees  should  be  entitled  “to  charge  all 
persons  and  corporations  to  whom  they  shall  furnish  refrigera¬ 
tion  or  heat  under  this  ordinance  such  sum  or  sums  as  thev 
shall  agree  upon  and  see  fit,  not  exceeding  the  average  amount 
demanded  and  received  by  the  owners  of  similar  plants  and 
franchises  in  other  cities  of  the  United  States  containing  no 
less  than  40,000  inhabitants.”  It  w*as  provided  that  within 
one  year  before  the  expiration  of  the  franchise  the  grantees 
should  have  the  privilege  of  applying  for  a  twenty-five  year 
renewal,  and  they  should  be  entitled  to  this  renewal  upon 
terms  fixed  by  the  mayor  and  the  city  council.  In  case  of 
the  grantees’  failure  to  apply  for  a  renewal,  or  in  case  of 
failure  to  agree  with  the  city  upon  the  terms  of  the  renewal, 


504 


MUNICIPAL  FRANCHISES. 


it  was  provided  that  there  should  be  a  fair  valuation  of  the 
plant  and  property  which  should  be  transferred  to  the  city, 
at  its  election,  upon  payment  of  an  arbitrated  valuation, 
“  such  valuation  not  to  include  the  value  of  the  franchise  or 
right”  It  was  provided  that  of  the  three  arbitrators  one 
should  be  appointed  by  the  mayor,  one  by  the  grantees  and 
the  third  selected  by  the  other  two;  but  in  case  of  their 
failure  to  select  the  third,  the  mayor  was  to  appoint  him. 
In  case  of  the  failure  of  the  grantees  to  appoint  an  arbitrator 
to  represent  them  the  mayor  was  to  be  entitled  to  appoint 
three  arbitrators  and  the  award  of  the  majority  of  them  was 
to  be  decisive.  As  a  part  of  the  consideration  for  this  grant, 
it  was  agreed  that  the  “  easement  ”  to  lay  pipes  or  conduits 
under  the  streets  of  the  city  should  be  “  an  easement  in  land 
and  a  form  of  real  estate  subject  to  the  payment  annually  of 
an  amount  to  the  mayor  and  city  council  of  Baltimore  equal 
in  the  amount  to  what  said  easement,  as  real  estate,  would 
be  assessed  and  taxed  if  the  same  was  taxable.” 

230.  Kates  to  be  regulated  by  the  municipality— Kansas 
City,  Mo  . — An  ordinance  approved  August  14,  1902,  in  the 
city  of  Kansas  City,  Mo.,  authorized  James  E.  Brady,  his  suc¬ 
cessors  and  assigns  to  construct,  acquire,  maintain  and  oper¬ 
ate  a  refrigerating  and  cold  storage  plant  in  the  city;  to 
manufacture,  sell  and  supply  refrigeration  within  a  certain 
designated  district  and  to  lay  and  maintain  pipes  and  mains 
below  the  surface  of  the  streets,  sidewalks  and  public  places 
for  this  purpose.  It  was  stipulated  that  the  pipes,  mains  and 
connections  should  be  laid  under  the  supervision  of  the  Board 
of  Public  Works  and  should  occupy  such  portions  of  the 
streets  as  might  be  designated  by  that  board.  The  grantee 
and  his  successors  were  required  to  construct  and  maintain  a 
refrigerating  plant  of  capacity  sufficient  to  furnish  any  and 
all  persons  or  corporations  desiring  refrigeration  within  a 
specified  district.  Furthermore,  the  grantee  was  obligated,  at 
his  own  expense,  to  make,  within  a  reasonable  time  upon  re¬ 
quest,  the  necessary  connections  between  his  pipes  and  the 
curb  line  of  the  property  owners.  It  was  provided  that  the 
connections  writh  “  the  buildings  or  improvements  to  be  re¬ 
frigerated  ”  should  be  made  by  the  property  owners  at  their 
own  expense  under  the  supervision  of  the  grantee.  A  tax  of 
two  per  cent  of  the  gross  receipts  from  the  sale  of  all  re- 


REFRIGERATION  FRANCHISES. 


505 


frigeration  supplied  from  the  central  plant  was  agreed  upon 
as  compensation  for  the  franchise.  There  was  the  usual  pro¬ 
vision  that  street  work  should  be  done  under  city  supervision 
and  that  the  grantee’s  pipes  should  not  interfere  with  munici¬ 
pal  improvements.  It  was  expressly  stipulated  that  after  the 
expiration  of  ninety  days  from  the  approval  of  the  ordinance, 
the  franchise  could  not  be  assigned  except  with  the  consent 
of  the  city,  expressed  by  formal  ordinance,  declaring  the  con¬ 
ditions  of  such  assignment.  The  grantee  was  required  to  file 
with  the  Board  of  Public  Works  once  a  year  a  verified  state¬ 
ment  of  all  pipes,  mains  and  connections  of  every  kind  con¬ 
structed  by  him  during  the  preceding  year  and  showing  the 
location  of  such  structures.  The  franchise  was  to  be  ac¬ 
cepted  in  writing  and  the  plant  put  into  operation  within  two 
years  thereafter,  on  penalty  of  the  forfeiture  of  the  grant. 
A  penalty  fund  of  $500  was  to  be  deposited  to  insure  the 
faithful  performance  of  the  conditions  of  the  ordinance.  The 
city  expressly  reserved  the  right  at  all  times  to  regulate  by 
ordinance  the  prices  that  might  be  charged  for  refrigeration, 
and  from  time  to  time  to  “  fix  such  prices  therefor  as  may 
be  reasonable.”  In  case  of  dispute  as  to  reasonableness,  the 
point  was  to  be  determined  on  application  of  the  city  by  the 
Circuit  Court  of  Jackson  County.  It  was  provided  that  the 
failure  of  the  grantee  to  comply  with  the  provisions  of  the 
franchise  or  of  any  lawful  ordinance  of  the  city  should  re¬ 
sult  in  the  forfeiture  of  the  grant.  The  franchise  was  to 
run  for  a  period  of  thirty  years. 

231.  Extensions  to  earn  eight  per  cent— Wichita,  Ks.— 
A  refrigeration  franchise  was  granted  in  Wichita,  November 
20,  1906,  to  individuals.1  The  franchise  was  originally 
limited  to  a  specified  portion  of  the  city,  but  was  to  be  ex¬ 
tended  to  any  other  portion  of  the  city  where  the  mayor  and 
council  should  direct  refrigeration  to  be  furnished.  It  was 
agreed,  however,  that  the  mayor  and  council  should  not  re¬ 
quire  the  grantees  to  extend  their  plant  unless  such  exten¬ 
sions  would  be  “  at  least  an  eight  per  cent  investment.”  The 
work  of  the  grantees  was  to  be  done  under  the  supervision  of 
the  proper  city  authorities,  and  the  streets  were  to  be  restored 
within  fifteen  days  after  being  disturbed.  The  grantees  were 
required  to  construct  and  maintain  a  refrigerating  plant  of 

1  Laws  and  Ordinances  affecting  the  City  of  Wichita,  1908,  op.  cit.,  p.  689. 


506 


MUNICIPAL  FRANCHISES. 


sufficient  capacity  to  furnish  all  demands  within  a  prescribed 
district.  A  tax  of  three  per  cent  of  the  grantees’  gross  re¬ 
ceipts  from  the  sale  of  refrigeration  from  their  central  plant 
was  provided  for.  The  franchise  was  declared  not  to  be 
assignable  after  six  months  without  the  city’s  consent,  and 
unless  the  refrigerating  plant  contemplated  by  the  ordinance 
was  constructed  within  four  months  after  the  acceptance  of 
the  ordinance,  the  grant  was  to  be  forfeited.  The  city  re¬ 
served  the  right  to  regulate  the  grantees’  charges,  and  other 
provisions  of  the  ordinance  were  similar  to  the  Kansas  City 
ordinance  described  in  the  preceding  section. 

232.  Regulation  of  street  work— Seattle. — An  early  re¬ 
frigerating  franchise  granted  by  the  city  of  Seattle,  June  14, 
1890,  to  the  Pacific  Freezing  and  Cooling  Company  and  later 
transferred  to  the  Diamond  Ice  and  Storage  Company  and 
still  later  to  the  Seattle-Tacoma  Power  Company,  contained 
no  important  provisions  other  than  those  relating  to  the 
supervision  of  street  work.1  The  scope  of  this  ordinance  is 
interesting  in  that  it  provides  for  the  construction  and  opera¬ 
tion  of  refrigerating  works  together  with  the  right  to  use  the 
streets  and  public  places  for  the  operation  of  pipe  lines  and 
the  necessary  feeders  and  service  pipes  “  for  the  conveyance, 
distribution  and  regulation  of  liquid  anhydrous  ammonia, 
or  otherwise  composed  liquified  gas  or  gases  for  refrigerating 
purposes  and  for  the  conveyance  of  the  expanded  ammonia 
or  other  gas  or  gases  used  in  the  process  of  refrigeration.” 
The  grantee  was  not  authorized  to  open  or  encumber  more 
of  any  street  or  alley  at  any  one  time  than  should  be  neces¬ 
sary  to  enable  it  to  proceed  with  advantage  in  the  laying  of 
its  pipes,  and  wherever  practicable  it  was  to  “  work  only  on 
alternate  blocks  and  not  on  continuous  blocks.”  It  was  ex¬ 
pressly  required  to  put  up  the  necessary  barriers  and  lights 
at  street  excavations  to  prevent  injury  to  persons  and  prop¬ 
erty.  All  work  under  the  franchise  was  to  be  done  subject 
to  the  supervision  of  the  street  commissioner. 

1  Charter  and  Ordinances  of  Seattle,  1908,  p.  429. 


CHAPTER  XVII. 


PNEUMATIC  TUBES  AND  THE  FRANCHISES  UNDER 
WHICH  THEY  ARE  OPERATED. 

233.  History  of  the  use  of  pneumatic  237.  General  commercial  franchises.— 

tubes  for  the  distribution  of  NewYork  City. 

United  States  mail.  238.  Revocable  permits.— Boston. 

234.  Construction,  equipment  and  oper-  239.  Franchise  for  mails  only.— St.  Louis. 

ation  of  pneumatic  tubes.  240.  Tubes  revert  to  city  after  twenty 

235.  Capitalization,  costs,  and  inter-  years.— Chicago. 

company  relations  in  the  pneu-  241.  Compressed  air  franchise.— Dallas, 

matic  tube  business.  Tex. 

236.  Government  ownership  and  fran-  242.  Waste  water  power  utilized  to  oper- 

chise  relations  with  cities.  ate  a  compressed  air  plant.— Rich¬ 

mond,  Va. 

233.  History  of  the  use  of  pneumatic  tubes  for  the  dis¬ 
tribution  of  United  States  mail. — The  first  American  city  in 
which  mail  was  transmitted  from  one  point  to  another  by 
means  of  pneumatic  tubes  was  Philadelphia,  where  a  service 
of  about  one-half  mile  was  in  operation  as  an  experiment 
from  1893  to  1898.1  In  the  latter  year,  pneumatic  service 
was  installed  to  a  limited  extent  in  Boston  and  New  York, 
and  since  that  time  Chicago  and  St.  Louis  have  been  added 
to  the  list  of  cities  in  -which  mail  is  transmitted  by  the  tube 
system.  There  was  on  November  10,  1908,  a  total  of  42.6 
miles  of  tubes  being  operated  under  contract  for  the  Govern- 
meDt.  In  all  cases  these  tubes  were  operated  by  private  comr 
panies,  and  the  annual  rental  paid  by  the  Government  was 
$17,000  per  mile,  or  a  total  of  about  $724,000.  A  special 
committee  of  experts,  appointed  in  1900  to  give  considera¬ 
tion  to  all  matters  pertaining  to  the  use  of  pneumatic  tubes 
for  the  transmission  of  mail  and  to  advise  the  Postmaster- 
General  in  regard  to  the  cost  of  construction  and  operation 
and  the  utility  of  the  various  systems  of  pneumatic  tubes, 
rendered  a  report  on  December  20  of  that  year,  recommend¬ 
ing  that  the  existing  service  which  consisted  of  a  little  over 

1  See  “  Investigations  as  to  Pneumatic-Tube  Service  for  the  Mails' '  published  by 
the  Government,  1909.  pp.  15  et.  seq. 


507 


508 


MUNICIPAL  FRANCHISES. 


eight  miles  of  tubes  in  operation  in  Boston,  New  York  and 
Philadelphia,  should  be  continued  and  that  the  service 
should  be  extended  in  these  cities  and  undertaken  in  Chicago 
and  St.  Louis  also.1  The  total  length  of  new  lines  recom¬ 
mended  by  this  committee  was  36.83  miles.  The  committee 
carefully  considered  the  claims  of  Brooklyn,  Cincinnati  and 
San  Francisco  in  addition  to  the  five  cities  already  men¬ 
tioned.  It  found,  however,  the  cost  of  the  tube  service  to 
be  so  great  that  the  system  could  not  be  used  with  profit  ex¬ 
cept  in  a  comparatively  few  cities,  and  then  only  for  the 
transmission  of  mails  between  the  principal  local  centers  of 
distribution.  A  table  prepared  by  this  committee  showed 
that  the  cost  of  the  service,  based  upon  the  offers  made  by 
the  various  tube  companies,  would  amount  to  60  per  cent  of 
the  net  revenue  from  first  class  local  mail  in  Boston;  to 
18.7  per  cent  of  such  revenue  in  New  York;  to  145  per  cent 
in  Brooklyn;  to  24  per  cent  in  Philadelphia;  to  46  per  cent 
in  Cincinnati;  to  25.4  per  cent  in  Chicago;  to  61  per  cent  in 
St.  Louis,  and  to  111  per  cent  in  San  Francisco.2  The  com¬ 
mittee  had  already,  after  careful  investigation,  eliminated 
three  other  cities,  Washington,  New  Orleans  and  Denver, 
from  further  consideration.  The  table  of  costs,  as  compared 
with  annual  revenues  for  the  eight  cities  held  for  final  con¬ 
sideration,  convinced  the  committee  that  the  tube  service 
would  be  altogether  unprofitable  in  Cincinnati  and  San 
Francisco  and  that  it  could  be  maintained  in  Brooklyn  only 
to  the  extent  of  the  line  of  tubes  connecting  the  general  post 
office  with  the  general  post  office  in  New  York.  The  ex¬ 
tensions  that  had  been  proposed  in  several  of  the  other  cities 
were  cut  down  by  the  committee. 

By  the  post  office  appropriation  bill  for  the  year  ending 
June  30,  1903,  the  Postmaster-General  was  given  $500,000 
for  pneumatic  tube  service,  and  was  authorized  to  enter  into 
contracts  for  such  service  for  a  period  of  not  more  than  four 
years.  It  was  also  provided  that  before  the  contracts  were 
let,  proposals  should  be  received  after  advertisements,  and 
that  before  any  such  advertisements  were  issued,  a  careful 
investigation  should  be  made  as  to  the  needs  and  practica¬ 
bility  of  the  pneumatic  tube  service  and  a  favorable  report 

1  See  Report  of  the  Postmaster-General  to  Congress  on  “ Pneumatic-Tube 
Service Jan.  4,  1901. 

2  See  Report  of  Jan.  4, 1901,  op.  cit .,  pp.  29,  30. 


PNEUMATIC  TUBE  FRANCHISES. 


509 


be  submitted  in  writing  to  the  Postmaster-General  by  a 
commission  of  not  less  than  three  expert  postal  officials.  It 
was  further  provided  that  no  contract  should  involve  an  ex¬ 
penditure  for  tube  service  of  more  than  four  per  cent  of  the 
gross  postal  revenues  of  the  city  in  which  the  service  was  to 
be  furnished.  It  was  also  provided  that  in  any  city  where 
the  contract  called  for  more  than  three  miles  of  double  lines 
of  tube,  the  rental  should  not  exceed  $17,000  a  mile.  The 
Postmaster-General  was  prohibited  from  entering  into  con¬ 
tracts  prior  to  June  30,  1904,  involving  an  aggregate  an¬ 
nual  expenditure  for  tube  service  of  more  than  $800,000. 
Under  this  act,  contracts  were  let  for  about  fifty  miles  of 
tubes. 

A  special  commission  of  experts,  appointed  to  investigate 
the  advisability  of  extending  the  tube  service,  rendered  a  re¬ 
port  in  1905  recommending  a  total  of  seventy-five  miles  in¬ 
cluding  the  twenty-six  miles  then  in  operation.  Under  this 
committee’s  recommendations,  the  service  was  to  be  extended 
to  Baltimore,  Cincinnati,  Kansas  City,  Pittsburgh  and  San 
Francisco.  Under  the  post  office  appropriation  bill  for  the 
fiscal  year  ending  June  30,  1907,  the  Postmaster-General 
was  authorized  to  enter  into  contracts  for  a  period  not  ex¬ 
ceeding  ten  years  involving  an  aggregate  annual  expenditure 
of  not  more  than  $1,250,000.  Under  this  act,  contracts  were 
made  which  will  expire  on  June  30,  1916.  On  November  10, 
1908,  there  was  yet  to  be  built  under  these  contracts,  a  total 
of  21.97  miles  of  tubes  in  New  York,  Philadelphia,  Chicago 
and  St.  Louis.  The  Post  Office  Department  received  no 
proposals  in  response  to  its  advertisements  for  the  construc¬ 
tion  of  tubes  in  Baltimore,  Cincinnati,  Kansas  City,  Pitts¬ 
burgh  or  San  Francisco.  The  length  of  tubes  in  actual 
operation  in  the  various  cities  on  November  10,  1908,  was  as 
follows:  Boston,  6.652  miles;  New  York,  19.306  miles; 
Brooklyn,  1.35  miles;  Philadelphia,  6.02  miles;  Chicago,  7.41 
miles;  and  St.  Louis,  1.85  miles.1 

Another  special  committee  reporting  to  the  Postmaster- 
General,  December  10,  1908,  stated  that  the  six  post  offices 
where  the  pneumatic  tubes  were  in  operation,  furnished 
about  27  per  cent  of  the  entire  postal  revenues  of  the  de¬ 
partment  and  about  the  same  percentage  of  first-class  mail 

1  Investigations,  etc.,  op.  cit„  p.  21. 


510 


MUNICIPAL,  FRANCHISES. 


originating  in  the  United  States.  It  was  stated  that  in  these 
cities  about  46  per  cent  of  all  first-class  matter  dispatched 
and  about  43J  per  cent  of  all  first-class  mail  received,  went 
through  the  pneumatic  tubes.  About  11  per  cent  of  all  first- 
class  mail  matter  handled  in  these  post  offices  was  said  to 
have  been  advanced  in  time  by  the  use  of  the  tube  service. 

There  are  several  advantages  of  the  pneumatic  tube  serv¬ 
ice  for  handling  letters  in  the  congested  postal  centers.  One 
of  these  is  the  speed  with  which  the  mail  can  be  transmitted 
from  the  general  post  office  to  and  from  the  principal  rail¬ 
road  stations  and  postal  dispatching  centers.  The  tubes  are 
operated  at  a  contract  speed  of  30  miles  per  hour,  which 
is  greatly  in  excess  of  the  speed  that  can  be  attained  by 
wagon  service,  street  car  service  or  automobile  service.  It 
it  also  to  be  noted  that  one  tube  carrier  may  be  dispatched 
every  13  or  15  seconds  so  that  during  20  hours  of  con¬ 
tinuous  operation,  4,800  dispatches  of  mail  may  be  effected  in 
each  direction.  It  is  found,  however,  that  the  tubes  are 
clogged  by  the  sudden  accumulation  of  heavy  mails,  for  the 
reason  that  the  capacity  of  a  tube  carrier  is  only  about  450 
letters  or  9  pounds  in  weight,  whereas  a  regular  mail  wagon 
has  a  capacity  of  from  1,200  to  5,000  pounds.  The  tubes,  how¬ 
ever,  have  an  advantage  in  regularity  over  the  wagon  service, 
on  account  of  congestion  of  traffic  due  either  to  narrow 
streets,  or  to  heavy  volume,  or  to  storms.  The  tubes  are 
especially  important  in  connection  with  the  distribution  of 
special  delivery  letters.  It  is  to  be  noted,  however,  that  on 
account  of  the  irregularity  in  the  accumulation  of  mail,  the 
tubes  cannot  be  used  to  anywhere  near  their  full  capacity. 
The  maximum  use  on  the  busiest  section  in  New  York  is 
66.6  per  cent  of  capacity,  while  the  smallest  use  on  one  sec¬ 
tion  in  Boston  falls  to  2.2  per  cent  of  capacity.  Of  a  total 
of  36  miles  of  tubes  upon  which  the  committee  had  reports, 
the  daily  use  exceeded  10  per  cent  of  the  tube  capacity  on  not 
quite  20  miles,  while  it  was  less  than  10  per  cent  on  the  more 
than  16  miles  remaining.1 

234.  Construction,  equipment  and  operation  of  pneumatic 
tubes.' — The  standard  type  of  pneumatic  tube  in  use  for  the 
mail  service  is  8  inches  in  diameter,  inside  measurement.2 

1  Investigations ,  etc.,  op.  cit.,  p.  31. 

3  See  article  by  Edward  D.  Sabine  in  Compressed  Air  for  May,  1905,  p.  3470. 


PNEUMATIC  TUBE  FRANCHISES. 


511 


The  tubes  are  laid  in  pairs,  one  running  in  each  direction, 
so  as  to  provide  for  continuous  service  either  way.  Cast 
iron  pipes  are  used  with  bell  and  spigot  ends,  sometimes 
bored  smooth,  and  always  carefully  laid.  A  deflection  of 
only  one  and  one-half  inches  in  12  feet  is  allowed.  On  this 
account  in  cities  that  are  not  level  the  tubes  sometimes  have 
to  be  laid  deep.  In  any  case,  the  trenches  in  which  the  tubes 
are  laid,  must  be  open  for  a  long  distance  at  a  time  in  order 
to  show  obstructions  and  permit  the  pipes  to  be  carried  past 
them  without  exceeding  the  maximum  deflection  allowed. 
The  tubes  are  usually  operated  either  by  blowers  or  by  com¬ 
pressed  air  engines.  In  either  case  provision  is  made  for  a 
continuous  current  of  air  in  one  direction.  In  any  case  the 
pipes  must  be  carried  below  the  frost  line,  and  at  bends  a 
proper  curvature  is  required  to  permit  the  passage  of  the 
carriers.1  At  the  station  terminals,  the  sending  and  receiv¬ 
ing  apparatus  are  known  as  transmitter  and  receiver.  This 
apparatus  is  of  somewhat  varying  type  and  is  designed  to 
permit  the  carriers  to  be  placed  in  the  tube  without  inter¬ 
ruption  and  to  be  brought  to  a  stop  at  the  terminal  station  so 
as  to  obviate  danger  and  so  as  to  facilitate  handling.  In  the 
case  of  a  long  line  reaching  from  the  central  post  office  to 
several  sub-stations,  the  carriers  for  the  farthest  station  have 
to  be  received  and  dispatched  at  each  of  the  intermediate 
stations.  The  carrier  used  is  a  cylindrical  steel  shell  about 
two  feet  in  length.  The  surface  of  the  carrier  is  galvanized 
to  prevent  rust.  At  one  end  the  carrier  has  a  permanent 
bottom  and  at  the  other  end  a  hinged  cover  which  may  be 
opened  for  the  purpose  of  putting  the  letters  in.  While  the 
eight-inch  tube  is  the  standard  size,  there  is  a  ten-inch  line 
in  use  in  Boston  and  a  six-inch  line  in  Philadelphia. 

235.  Capitalization,  costs  and  inter-company  relations  in 
the  pneumatic  tube  business. — The  American  Pneumatic 
Service  Company,  incorporated  in  Delaware  on  July  1,  1889, 
claims  to  control  practically  all  of  the  important  patents 
relating  to  pneumatic  tube  systems  for  use  in  stores,  build¬ 
ings,  factories,  hotels  and  foy  forwarding  mail.2  This  com¬ 
pany  controls,  through  stock  ownership,  about  fifteen  other 
companies  with  a  total  issued  stock  and  bonds  of  a  par  value 

1  Investigations ,  etc.,  op.  cit.,  p.  40. 

*  See  Moody's  Manual ,  1908  Edition,  p.  2058. 


512 


MUNICIPAL  FRANCHISES. 


of  nearly  $8,000,000.  The  outstanding  capital  stock  of  the 
parent  company  is  about  $16,000,000  and  its  bonds  $1,000,- 
000.  This  company  controls  the  New  York  Pneumatic  Serv¬ 
ice  Company,  the  Boston  Pneumatic  Transit  Company,  the 
Chicago  Postal  Pneumatic  Tube  Company  and  the  St.  Louis 
Pneumatic  Tube  Company,  which  make  up  the  entire  list  of 
companies  having  contracts  with  the  Government,  with  the 
single  exception  of  the  Pneumatic  Transit  Company  of 
Philadelphia.1  While  the  American  Pneumatic  Service  Com¬ 
pany  claims  to  have  a  practical  monopoly,  the  special  com¬ 
mittee  of  1908  reported  that  certain  competing  companies 
in  Boston,  New  York  and  Chicago  had  represented  to  the 
committee  that  they  were  in  a  position  to  enter  into  contract 
with  the  Government  for  installing  pneumatic  tube  service. 
Commenting  upon  this  feature  of  the  situation,  the  committee 
said : 2 

“Pneumatic  tubes  have  been  in  use  for  a  great  many  years  both  in 
foreign  countries  and  in  the  United  States,  and  it  is  believed  by  this 
committee  that  the  process  of  propelling  an  object  through  a  tube  by 
air  pressure  or  suction  is  common  property  and  that  no  patent  prevents 
the  free  use  of  the  basic  principle.  The  patents  scheduled  by  the  Ameri¬ 
can  Pneumatic  Service  Company  appear  to  relate  to  particular  patterns 
of  bent  pipes, to  particular  patterns  of  receivers  and  transmitters,  and  to 
particular  patterns  of  tube  carriers ;  and  it  is  our  opinion  that  many  of 
these  patents  cover  merely  minor  variations  of  method,  and  are  held  not 
so  much  for  use  as  for  protection  against  conflicting  patents.  In  view 
of  all  the  circumstances  recited  above,  one  is  not  warranted  in  accept¬ 
ing  without  question,  the  claim  of  the  American  Pneumatic  Service 
Company  that  they  control  an  absolute  and  complete  monopoly  of  the 
patents  necessary  for  the  purpose  of  a  pneumatic-tube  mail  service." 

In  response  to  the  Government’s  inquiry  as  to  the  price 
at  which  the  various  pneumatic  tube  systems  in  use  for  the 
transmission  of  mails  could  be  purchased,  the  American 
Pneumatic  Service  Company  stated  that  the  total  cost  of  its 
system,  including  in  part  the  stock  and  bonds  at  par,  was 
$7,093,  557,  while  the  actual  cost  of  construction  as  shown  by 
its  books  was  $5,526,822.  The  Pneumatic  Transit  Com¬ 
pany  of  Philadelphia,  fixed  $1,390,000  as  the  purchase  price 
for  its  system  on  the  basis  of  8.21  miles  of  tubes.  The  origi¬ 
nal  cost  of  construction  was  stated  as  being  $601,730  with 
cost  of  alterations  and  losses  in  operation  amounting  to 
$108,254  additional.  The  committee  estimated  that  the  en- 

1  Investigations ,  etc.,  op.  cit.,  p.  89. 

3  Ibid.,  p.  47. 


PNEUMATIC  TUBE  FRANCHISES. 


513 


tire  cost  of  reproducing  the  45  miles  of  pipe  in  operation 
(including  1.915  miles  just  opened  in  Philadelphia),  would 
be  approximately  $3,000, 000.1  It  may  be  noted  that  in  1900 
the  Tubular  Dispatch  Company  of  New  York,  whose  prop¬ 
erty  and  franchises  were  later  sold  at  foreclosure  for  a  com¬ 
paratively  small  sum,  stated  to  the  committee  of  experts  that 
the  cost  of  its  property,  franchises  and  patents,  including 
construction,  stood  upon  its  books  in  June,  1900  at  $2,153,- 
000.2  This  company  then  had  a  capital  stock  of  $1,500,000 
and  bonded  indebtedness  of  $600,000.  This  company’s  as¬ 
sets  were  purchased  in  1906  by  the  New  York  Pneumatic 
Service  Company,  payment  being  made  with  the  latter  com¬ 
pany’s  entire  capital  stock  of  $300,000.  In  discussing  the 
relations  between  the  various  tube  companies,  reference 
should  be  made  to  the  Batcheller  Pneumatic  Tube  Company 
of  Philadelphia,  which  owns  a  considerable  number  of 
patents.3  By  an  agreement,  however,  between  this  company 
and  the  American  Pneumatic  Service  Company,  the  latter 
controls  the  right  to  use  the  former  company’s  patents  for 
the  entire  United  States  excepting  the  state  of  West  Virginia, 
the  state  of  Pennsylvania  excluding  Pittsburgh  and  the  city 
of  Camden,  N.  J.  It  is  understood  also  that  the  Batcheller 
Pneumatic  Tube  Company  has  given  the  Pneumatic  Transit 
Company  of  Philadephia  the  right  to  use  its  patents  in 
Philadelphia  and  Camden. 

236.  Government  ownership  and  franchise  relations  with 
cities. — The  appropriation  made  by  Congress  on  June  2, 
1900,  for  the  investigation  of  pneumatic  tubes,  required  that 
the  Postmaster-General  should  collect  evidence  to  enable 
Congress  to  determine  whether  the  service  should  be  “  owned, 
leased,  extended  or  discontinued  by  the  Government.”  In 
regard  to  government  ownership,  the  committee  said : 4 

“  In  view  of  the  importance  of  the  pneumatic-tube  service  to  busi¬ 
ness  men  and  of  its  popular  character,  city  governments  should  be 
expected  to  give  all  needful  co-operation  should  the  General  Govern¬ 
ment  elect  to  undertake  the  construction  and  ownership  of  lines  needed 
for  its  exclusive  use.  As  to  whether  the  General  Government  should 
own  and  operate  these  lines  involves  many  questions  of  public  policy 
about  which  this  committee  does  not  feel  called  upon  to  express  an 
opinion  further  than  to  say : — 

1  Investigations ,  etc.,  op.  cit.,  p.  50. 

*  Report  of  Jan.  4,  1901,  op.  cit.,  p.  52. 

*  Investigations ,  etc.,  op.  cit.,  p.  39. 

4  Report  of  1901,  op.  cit.,  p.  37. 


514 


MUNICIPAL  FRANCHISES. 


“  The  facilities  to  be  provided  are  special  and  exclusive. 

“  Operation  and  maintenance  through  the  agency  of  the  Government 
appears  to  be  entirely  feasible. 

“  The  annual  cost  would  be  very  materially  reduced. 

“An  important  and  necessary  public  service  would  not  be  subject  to 
the  possibility  of  unreasonable  exactions. 

“  On  the  other  hand,  it  must  be  pointed  out  that  pneumatic-tube  serv¬ 
ice,  while  it  has  passed  beyond  the  mere  experimental  stage,  still  is 
subject  to  material  development.” 

The  committee,  further,  opposed  a  system  of  rental  based 
on  a  fixed  percentage  of  cost  on  the  ground  that  such  a  sys¬ 
tem  guaranteed  no  limit  of  annual  cost  to  the  government  and 
opened  the  door  for  abuses. 

“Asa  matter  of  principle,”  continued  this  report,  “the  committee 
would  assume  it  to  be  indubitable  that  the  Government  should,  when¬ 
ever  practicable,  own  its  apparatus,  of  whatever  kind,  and  especially 
whenever  the  service  would  be  otherwise  liable  to  interruption  or  im¬ 
pairment.  On  this  principle  it  would  seem  unquestionably  important 
that  so  vital  a  matter  as  the  private  ownership  of  all  systems  of  postal 
transmission  and,  even  more  undeniably,  systems  of  special  and  essential 
character  such  as  those  here  studied,  should  be  brought  into  accordance 
with  this  view  at  the  earliest  possible  moment.  While  it  may  often  be 
advisable  that,  in  the  experimental  stages,  such  promising  improvement 
may,  and  often  must,  be  left  in  the  hands  of  inventors  and  promoters, 
it  should  be  held  to  be  an  admitted  and  indisputable  principle  that,  at 
the  earliest  possible  stage  in  its  development,  once  its  permanent  intro¬ 
duction  seems  assured  by  its  successful  operation,  the  Government 
should  construct  the  apparatus  from  its  own  specifications  and  by  fair 
competitive  bidding,  under  the  advice  and  supervision  of  its  own 
experts,  and  in  entire  independence  of  the  commercial  interests 
involved.” 

The  committee  recommended  that  if  the  contracts  with 
private  companies  were  renewed,  there  should  be  inserted  in 
each  lease,  an  option  for  purchase  by  the  Government  of  all 
the  property  and  patent  rights  applicable  to  the  contract  at 
a  valuation  fixed  by  experts  or  at  a  figure  stated  in  the 
lease. 

At  this  time  the  service  was  costing  the  Government  about 
$27,000  a  mile  each  year.  The  committee  expressed  the 
opinion  that  the  cost  could  be  largely  reduced.  This  ex¬ 
pectation  was  realized  under  the  contracts  later  entered  into 
and  the  annual  rental  per  mile  is  now  $17,000.  The  special 
committee  reporting  December  10,  1908,  recommended  that 
inasmuch  as  the  existing  contracts  would  not  expire  until 
June  30,  1916,  there  would  be  ample  opportunity  before  that 
time  for  the  companies  to  perfect  their  systems  and  for  the 


PNEUMATIC  TUBE  FRANCHISES. 


515 


Post  Office  Department  to  observe  the  effect  of  the  tubes  upon 
the  postal  service.1  The  committee  also  suggested  that  during 
this  period  other  methods  of  transportation  might  be  developed 
or  improved  so  as  to  change  the  outlook  entirely.  It  con¬ 
cluded  further  that  it  was  not  feasible  or  desirable  at  the 
present  time,  for  the  Government  to  purchase,  to  install  or  to 
operate  the  pneumatic  tubes,  but  suggested  that  five  or  six 
years  later  it  would  be  advisable  to  renew  consideration  of  the 
question  of  government  ownership. 

In  a  letter  dated  September  28,  1908,  addressed  to  the 
mayors  of  the  several  cities  in  which  pneumatic  tubes  were 
in  operation,  the  pneumatic  tube  committee  inquired  as  to 
the  probable  attitude  of  the  municipal  governments  towards 
the  United  States  Government  in  case  the  latter  desired  to 
open  the  streets  of  the  cities  for  the  construction  and  opera¬ 
tion  of  tubes.  The  position  taken  by  the  Post  Office  Depart¬ 
ment  with  respect  to  the  general  rights  of  the  United  States 
in  the  conduct  of  the  mail  service  was  set  forth  in  the  fol¬ 
lowing  propositions :  2 

“  That  the  Constitution  of  the  United  States  confers  upon  Congress 
the  power  to  establish  post-offices  and  post-roads. 

“That  this  power  granted  to  Congress  carries  with  it  all  powers 
necessary  to  make  it  effective. 

“  That  all  the  streets  of  a  city  like  St.  Louis  (for  example)  over  which 
letter-carrier  routes  are  established  are  post-roads  under  the  law. 

“That  the  conduct  of  the  postal  business  by  the  Post  Office  Depart¬ 
ment  is  a  governmental  function. 

“  That  any  statute  or  ordinance  which  imposes  any  restriction  on  the 
free  exercise  of  this  function  other  than  to  make  the  agents  of  the  Gov- 
erment  subject  to  the  local  police  regulations  or  the  police  power  of 
the  State,  will  have  no  effect  as  against  the  United  States.” 

Commenting  upon  these  claims  of  the  postal  department, 
the  city  counselor  of  St.  Louis  said : 3 

“The  United  States  Government,  through  its  officers,  agents,  licen¬ 
sees,  and  contractors  has  the  same  right  to  use  highways  located  within 
the  city  of  St.  Louis  that  other  members  of  the  public  have,  but  no 
more  right.  This  right,  as  before  stated,  is  the  right  to  travel  and  the 
incidents  thereto. 

“The  United  States  Government,  in  my  judgment,  has  no  right  to 
enter  upon  any  highway  in  the  city  of  St.  Louis  and  excavate  the  same 
or  locate  therein  any  permanent  structure  without  the  consent  of  the 
City  of  St.  Louis. 

1  Investigations ,  etc.,  op.  cit.,  p.  12.  2  Ibid.,  p.  98.  8  Ibid.,  p.  100. 


516 


MUNICIPAL  FRANCHISES. 


“  I  have  been  able  to  find  no  authority  of  any  court  which  tends  in 
any  way  to  declare  that  the  United  States  Government  has  any  other 
right  than  above  indicated  in  the  use  of  the  highways  in  any  state  or 
city. 

‘  ‘  The  acts  of  Congress  which  declare  all  highways  located  within  all 
the  states  post-roads  do  not  and,  in  my  judgment,  could  not  lawfully 
appropriate  for  the  exclusive  use  of  the  United  States  Government, 
without  compensation  or  authority  from  the  proper  state  or  city,  any 
portion  of  any  highway  without  the  consent  of  the  local  authorities, 
state  or  city,  as  the  case  may  be.” 

In  general,  however,  the  municipal  authorities  expressed 
their  willingness  to  cooperate  with  the  Government  and  to 
recognize  its  reasonable  claims  in  case  it  desired  to  operate 
pneumatic-tube  franchises. 

237.  General  commercial  franchises— New  York  City — 

Two  franchises  for  the  use  of  the  streets  in  New  York  City 
for  pneumatic  tubes  have  been  granted  directly  by  the  State 
legislature.  The  first  was  given  by  an  act  passed  May  9, 
1874,  according  to  the  terms  of  which  certain  persons  were 
authorized  to  organize  a  corporation  under  the  general  law 
for  the  organization  of  manufacturing  companies.1 

By  this  act,  the  grantees  were  authorized  “  to  lay  down, 
construct  and  maintain  tubes  of  iron,  wood  or  other  material, 
underground  and  beneath  the  bed  of  navigable  waters  in  and 
between  the  city  of  New  York,  and  the  villages,  towns  and 
cities  in  the  neighborhood  thereof,  at  such  depth  below  the 
bed  of  such  waters  as  not  to  interfere  with  the  channels, 
anchorage  or  navigation  thereof,”  and  for  the  purpose  of  such 
construction  underground,  they  were  given  “  the  right  to  open 
any  street  or  avenue  in  any  incorporated  town  or  city,  by 
and  with  the  consent  of  the  corporate  authorities  of  such 
town  or  city,  excepting  in  the  city  of  New  York,  where  such 
consent  shall  be  obtained  from  the  Commissioner  of  Public 
Works,  and  to  convey  letters,  parcels,  packages,  mails,  mes¬ 
sages,  merchandise  and  property  in  and  through  said  tubes, 
for  compensation,  by  means  of  the  pneumatic  method  of 
propulsion.”  It  was  enacted  that  any  one  wilfully  injuring 
the  tubes,  or  articles  deposited  in  them,  should  be  guilty  of  a 
misdemeanor  and  subject  to  a  fine  of  from  $100  to  $500,  or 
imprisonment  for  a  period  of  from  three  to  six  months,  and 
forfeit  to  the  owners  of  the  tubes  three  times  the  amount  of 
the  damages  inflicted.  The  legislature  specifically  reserved 

1  Laws  of  New  York,  1874,  chap.  400. 


PNEUMATIC  TUBE  FRANCHISES. 


517 


the  right  to  alter,  amend  or  repeal  this  act.  The  Tubular 
Dispatch  Company  was  organized  by  the  persons  upon  whom 
the  legislature  conferred  this  power. 

More  than  twenty  years  later,  another  act  was  passed 
granting  to  this  company  the  right  to  use  electricity  or  other 
mechanical  method  as  a  motive  power  in  addition  to  com¬ 
pressed  air.1  On  Feb.  9,  1897,  the  company  received  a 
general  permit  from  the  Commissioner  of  Public  Works  to 
lay  and  maintain  tubes  from  the  general  post  office  to  various 
sub-stations.2  On  Oct.  28,  1897,  the  company  received  per¬ 
mission  from  the  Board  of  Electrical  Control,  to  install  an 
electrical  cable  “  for  operation  of  switches  and  locking 
devices.” 3  v 

This  company  was  the  original  contractor  with  the  United 
States  Government  for  pneumatic- tube  service  in  New  York 
City.  Another  company,  however,  the  New  York  Mail  & 
Newspaper  Transportation  Company,  had  been  chartered  by 
the  legislature  in  1893  for  the  purpose  of  operating 
“  pneumatic  tubes  and  other  devices  for  the  speedy  transmis¬ 
sion  and  delivery  of  the  mails,  newspapers  and  parcels  within 
and  between  the  cities  ”  of  the  state,  and  had  been  authorized 
to  make  such  charges  for  pneumatic  service  as  it  should  agree 
upon  by  public  or  private  contract.4  It  was  given  the  power 
of  eminent  domain  for  the  purpose  of  taking  any  real  estate 
necessary  for  its  purposes  and  it  was  expressly  empowered 
“  without  other  or  further  authority  of  law  or  ordinance  ” 
to  do  any  or  all  of  the  following : — 

“To  locate,  to  construct,  to  maintain  and  to  operate  tubes  not  to  ex¬ 
ceed  three  feet  in  diameter  between  the  central  post  offices  and  the 
branch  post  offices  and  newspaper  offices  and  postal  stations  in  said 
cities  of  this  state  by  such  route  or  routes  as  shall  be  determined  by 
said  corporation  and  to  transmit  and  to  supply  power  along  any  or  ail 
of  its  route  or  routes  and  to  make  connections  with  and  between  said 
post  offices  and  buildings  in  which  newspapers  are  published  and  other 
buildings,  railways,  ferries,  and  postal  stations  within  and  between  the 
cities  of  this  state,  and  to  convey  and  transport  and  to  deliver  the  United 
States  mails,  newspapers,  and  parcels.” 

The  company  was  required  to  pay  annually  into  the 
treasuries  of  New  York  City  and  Brooklyn,  “  in  equal  parts, 
share  and  share  alike,  a  sum  equal  to  three  per  cent  of  its 

1  Laws  of  New  York,  1895,  chap.  977. 

3  Investigations ,  etc.,  op.  cit .,  p.  78. 

*  Minutes  of  the  Board  of  Electrical  Control,  op.  cit.,  vol.  2,  p.  1615. 

4  Laws  of  New  York,  1893,  chap.  164. 


518 


MUNICIPAL  FRANCHISES. 


gross  earnings  in  said  city  for  the  preceding  calendar  year, 
or  a  snm  equal  to  $1  for  every  100  yards  of  tubes  constructed 
and  operated  by  it  in  said  city.”  It  was  provided,  however, 
that  the  company  could  not  be  authorized  to  open  the  streets 
of  the  city  of  New  York  for  the  purpose  of  laying  its  tubes 
without  the  consent  of  the  mayor  or  the  commissioner  of  public 
works,  except  that  such  consent  was  not  to  be  required  “  for 
repairs  or  for  connections  not  to  exceed  in  the  length  of  any 
connection  a  distance  greater  than  the  length  of  four  city 
blocks  of  maximum  size.”  This  company  was  for  several  years 
after  1898  the  Government  contractor  for  the  tube  service 
between  the  general  post  offices  of  New  York  and  Brooklyn. 
In  1901  the  plant,  property  and  franchises  of  the  Tubular 
Dispatch  Company  were  leased  to  the  New  York  Mail  &  News¬ 
paper  Transportation  Company.  The  Tubular  Dispatch  Com¬ 
pany  was  sold  out,  however,  under  mortgage  foreclosure  in 
June,  1906,  and  was  succeeded  by  the  New  York  Pneumatic 
Service  Company,  which  secured  the  Government  contract  for 
both  New  York  and  Brooklyn  covering  a  period  of  ten  years 
ending  June  30,  1916.  The  corporation  counsel  of  New 
York  City  advised  the  comptroller  that  the  New  York  Mail  & 
Newspaper  Transportation  Company,  under  its  franchise,  was 
entitled  to  the  option  of  paying  three  per  cent  of  its  gross 
earnings  or  a  sum  equal  to  $1  for  every  one  hundred  yards 
of  tubes  constructed  by  it.  The  company  chose  to  make  its 
payments  on  the  latter  basis  which  is  said  to  yield  to  the 
city  a  small  sum  compared  to  three  per  cent  of  the  company’s 
gross  receipts.  Both  the  New  York  Pneumatic  Service  Com¬ 
pany  and  the  New  York  Mail  &  Newspaper  Transportation 
Company  are  controlled,  through  stock  ownership,  by  the 
American  Pneumatic  Service  Company.1 

238.  Revocable  permits  —  Boston. —The  special  committee 
of  1900  reported  that  the  American  Pneumatic  Service  Com¬ 
pany’s  system  of  tubes  had  been  laid  for  commercial  purposes 
in  the  city  of  Boston  on  a  double  line  of  about  5|  miles  in 
length.2  Under  the  general  laws  of  Massachusetts,  pneumatic 
tube  companies  are  authorized,  with  the  written  consent  of  the 
mayor  and  aldermen  of  the  city,  to  “  dig  up  and  open  the 
ground  in  any  of  the  streets,  lanes  and  highways  thereof,  so 

1  For  a  general  statement  in  regard  to  the  tube  companies  of  New  York  City, 
see  Investigations ,  etc.,  op.  cit pp.  78  to  80. 

*  Report  of  1001,  op.  cit.,  p.  23. 


PNEUMATIC  TUBE  FRANCHISES. 


519 


far  as  is  necessary  to  accomplish  the  objects  of  the  corpora¬ 
tion.”1  It  is  provided,  however,  that  the  consent  of  the 
local  authorities  shall  not  affect  the  right  to  recover  for  all 
damages  or  injuries  caused  to  persons  or  property.  It  is  also 
provided  that  streets  opened  for  the  laying  of  pneumatic  tubes 
shall  be  put  “  into  as  good  repair  as  they  were  in  when 
opened.”  If  any  person  sustaining  injuries  caused  by  an 
obstruction  of  the  highway  or  the  laying  down  or  repairing 
of  the  tubes  recovers  damages  from  the  city,  it  is  the  duty 
of  the  company  if  it  has  had  a  reasonable  notice,  to  repay  to 
the  city  the  amount  of  the  damages  so  recovered  with  the 
taxable  costs  of  both  parties  in  such  action.  The  mayor 
and  aldermen  are  authorized  to  regulate,  restrict  and  control 
the  company’s  “  acts  and  doings  which  may,  in  any  manner, 
affect  the  health,  safety,  convenience  or  property  ”  of  the 
citizens. 

Under  the  general  city^  ordinance  of  Boston  providing  the 
terms  and  conditions  upon  which  permits  for  opening  streets 
shall  be  issued,  it  is  required  that  the  official  issuing  such  a 
permit  shall  insert  a  condition  to  the  effect  that  the  person 
accepting  the  permit  shall  conform  to  the  statutes  and  ordi¬ 
nances  and  the  specifications  in  the  permit  itself.  Any  such 
permit  may  be  revoked  at  any  time  by  the  authority  issuing 
it,  and  it  is  provided  that  the  violation  of  any  of  its  specifica¬ 
tions  shall  effect  its  immediate  revocation.  It  is  required  that 
any  person  taking  out  such  a  permit  shall  indemnify  the  city 
against  damages  on  account  of  the  doing  of  the  work  per¬ 
mitted,  or  by  reason  of  any  negligence  on  the  part  of  the 
person  receiving  the  permit  or  his  employees.  Every  permit 
must  require  that  any  portion  of  the  street  surface  disturbed 
shall  be  kept  in  repair  for  the  period  of  one  year  after  being 
restored.  Every  permit  must  also  specify  the  time,  place, 
size,  and  use  of  the  opening  to  be  made  in  the  street.  It  is 
provided  that  any  person  receiving  a  permit  shall  maintain 
“  from  the  beginning  of  twilight  through  the  whole  of  every 
night,  over  or  near  the  place  so  occupied,  opened,  obstructed^ 
or  used,  and  over  or  near  any  dirt,  gravel,  or  other  material 
placed  in  or  near  such  place,  a  light  or  lights  sufficient  to- 
protect  travelers  from  injury.”  A  safe  and  convenient  way 
for  the  use  of  foot  travelers  past  the  obstruction  and  for 

1  Investigations ,  etc.,  op.  cit.,  p.  68. 


520 


MUNICIPAL  FRANCHISES. 


vehicles  around  or  over  the  place  must  also  be  provided. 
Trees  must  be  protected  in  a  manner  specified  by  the  superin¬ 
tendent  of  public  grounds.  The  person  doing  work  in  the 
street  must  “  provide  suitable  sanitary  accommodations  for  his 
employees/’  Every  permit  is  to  be  delivered  to  the  police 
ofiicer  on  or  before  the  expiration  of  the  time  fixed  for  the 
completion  of  the  work  and  the  police  officer  is  required  to 
return  the  permit  to  the  street  department.1 

239.  Franchise  for  mails  only— St.  Louis. — The  rights 
of  the  St.  Louis  Pneumatic  Tube  Company  in  the  city  of  St. 
Louis  are  set  forth  in  a  franchise  ordinance  approved  June 
10,  1903. 2  In  this  ordinance  certain  specified  streets  are 
named  in  which  the  company  is  authorized  “  to  lay  and  main¬ 
tain  pneumatic  tubes  with  the  necessary  man-holes  and 
switches,  to  be  used  for  the  purpose  of  transmitting  the  United 
States  mail  under  contract  made  with  the  United  States.” 
It  is  expressly  stated  that  the  tubes  shall  be  used  exclusively 
for  the  transmission  of  mail  matter.  It  is  provided  that  the 
discontinuance  or  abandonment  of  the  use  of  the  tubes  for 
this  purpose  for  the  period  of  one  year  shall  cause  the  for¬ 
feiture  of  the  franchise.  The  city  reserves  the  right  to 
inspect  and  control  the  construction  of  the  tubes  and  to 
order  any  changes  to  be  made  from  time  to  time  either  in 
the  construction,  material  or  manner  of  maintaining  them 
or  in  their  location  in  the  streets.  All  such  changes  required 
are  to  be  made  by  the  company  without  expense  to  the  city. 
The  company  is  required  to  execute  a  bond  in  the  amount  of 
$50,000  conditioned  upon  the  faithful  observance  of  the  terms 
of  the  grant  and  the  saving  of  the  city  from  damages  as  a 
result  of  the  construction  or  operation  of  the  tubes.  Failure 
on  the  part  of  the  company  to  furnish  or  renew  this  bond, 
when  required,  is  to  work  a  forfeiture  of  the  franchise.  The 
life  of  the  franchise  is  fixed  at  twenty-five  years  and  the  com¬ 
pany  is  required  to  make  an  annual  statement  of  its  gross  earn¬ 
ings  and  to  pay  into  the  city  treasury  five  per  cent  of  such 
earnings.  The  right  to  inspect  the  company’s  books,  so  far  as 
they  relate  to  gross  receipts,  is  reserved  to  the  city  comptroller. 

240.  Tubes  revert  to  city  after  twenty  years— Chicago.— 
Apparently  the  most  elaborate  pneumatic-tube  franchise 

1  See  Investigations ,  etc.,  op.  cit.,  pp.  68-71. 

2  Ibid ,  pp.  101,  102. 


PNEUMATIC  TUBE  FRANCHISES. 


521 


granted  in  any  city  is  that  contained  in  an  ordinance  passed 
by  the  Chicago  city  council,  July  13,  1903,  in  favor  of  the 
Chicago  Postal  Pneumatic  Tube  Company.1  Under  this 
franchise,  the  company  was  authorized  to  construct  and  oper¬ 
ate  tubes  “  with  all  suitable  switches,  turn-outs,  and  con¬ 
nections  with  such  electrical  or  other  connections  as  are 
absolutely  necessary  in,  through,  upon  and  under  the  streets, 
avenues,  alleys,  public  ways,  tunnels,  bridges,  viaducts  and 
under  the  Chicago  River.”  There  were  not  to  be  more  than 
two  tubes  on  each  route,  the  maximum  size  of  each  to  be  eight 
inches,  inside  diameter,  and  the  cross  section  of  the  route 
including  switches,  turn-outs  and  connections  to  be  approx¬ 
imately  275  square  inches.  Only  such  streets  and  places  were 
to  be  used,  however,  as  were  necessary  to  connect  the  post 
office  buildings  with  the  branch  post  offices,  sub-postal  stations 
and  steam  railway  stations.  The  tubes  were  to  be  constructed 
of  cast  iron,  steel  or  brass  capable  of  withstanding  a  pressure 
of  100  pounds  per  square  inch,  although  working  pressure  was 
limited  to  twenty  pounds  per  square  inch.  The  company 
was  required  to  file  a  map  and  plans  before  constructing  its 
tubes.  The  tubes  were  to  be  used  for  the  transmission  of 
United  States  mail  only,  by  compressed  air  or  such  other 
power  as  might  thereafter  be  authorized.  It  was  expressly 
provided  that  the  franchise  should  become  null  and  void  if 
the  tubes  were  ever  used  for  any  other  purpose. 

The  company  was  required  to  keep  on  file,  at  all  times,  with 
the  commissioner  of  public  works,  plans  showing  the  location 
of  each  pneumatic  tube,  switch,  turn-out  and  connection  and 
as  soon  as  it  had  laid  any  pneumatic  tubes,  to  file  a  plan 
showing  their  location  and  the  location  of  man-holes  and 
other  openings  by  which  access  to  them  could  be  obtained.  It 
was  expressly  required  that  each  cover  over  any  opening  should 
have  the  name  of  the  company  placed  upon  it.  It  was  also 
provided  that  the  commissioner  of  public  works  should 
designate  the  location  to  be  occupied  by  the  company’s  tubes 
and  that  the  tubes  should  be  laid  without  doing  any  permanent 
injury  to  the  streets  and  without  unnecessarily  disturbing  any 
authorized  sub-surface  structure  already  in  existence.  The 
company  was  required  to  commence  work  within  six  months 
and  have  at  least  eight  miles  of  tubes  completed  within  a 

1  See  Investigations ,  etc.,  op.  cit pp.  86  to  91. 


522 


MUNICIPAL  FRANCPIISES. 


year  from  the  date  of  the  ordinance,  barring  delays  caused 
by  injunction  or  by  the  action  of  the  city.  The  right  to 
intervene  in  any  injunction  suit  was  reserved  to  the  city. 

It  was  provided  that  before  any  permit  should  be  granted 
to  the  company  to  open  the  surface  of  any  street  or  public 
place,  an  estimate  of  the  cost  of  repairing  the  street  or  place, 
with  a  fair  additional  sum  as  margin,  should  be  made  by  the 
commissioner  of  public  works  and  the  amount  so  estimated 
should  be  deposited  by  the  company  with  the  city  comptroller 
to  remain  in  his  possession  for  the  period  of  one  year.  At 
the  end  of  that  time,  the  company  was  authorized  to  recover 
this  deposit  upon  presentation  of  a  certificate  from  the  com¬ 
missioner  to  the  effect  that  the  restored  pavement  was  in 
satisfactory  condition.  The  company  was  required,  on  notice 
from  the  commissioner,  to  “  remove  or  change  any  of  its 
pipes  or  tubes  which  may  be  in  the  way  of,  or  interfere  with 
the  construction  or  location  of  any  viaduct,  public  building, 
or  other  public  structure,  or  any  public  or  private  under¬ 
taking,  or  shall  interfere  with  the  lowering  of  the  tunnels 
under  the  Chicago  River.”  It  was  provided  that  whenever 
any  company,  acting  under  a  franchise  from  the  city  by  which 
the  city  retained  the  right  to  fix  the  rentals  and  conditions 
for  the  use  of  a  subway,  should  construct  a  general  subway 
in  any  street  in  which  the  company’s  tubes  wTere  located,  then 
on  due  notice  the  company  should  remove  its  tubes  at  its 
own  expense  and  place  them  in  the  subway,  and  comply  with 
all  the  ordinances  passed  concerning  rentals  for  space  in  such 
subway. 

The  franchise  was  granted  for  a  term  of  twenty  years,  and 
it  was  provided  that  at  any  time  after  the  expiration  of  ten 
years,  the  city  should  have  the  right  to  purchase  “  the  entire 
plant  or  plants  of  said  company  and  all  its  property  and  effects 
of  every  kind  or  nature  within  said  city  of  Chicago,  either 
by  mutual  agreement  or  at  an  appraised  value.”  It  was 
provided  that  the  city  and  the  company  should  each  appoint 
one  appraiser  and  a  third  should  be  appointed  by  the  first 
two ;  but  in  case  they  were  unable  to  agree  upon  a  third,  then 
he  should  be  selected  by  the  chief  justice  of  the  circuit  court 
of  Cook  County  on  petition  of  either  party.  The  three  ap¬ 
praisers  so  appointed  were  to  have  full  access  to  the  company’s 
books  and  were  required  to  make  their  report  within  six 


PNEUMATIC  TUBE  FRANCHISES. 


523 


months  after  their  appointment.  It  was  stipulated  that  “  the 
value  of  this  license  or  grant  is  not  to  be  taken  into  account 
or  considered  of  any  value  as  against  the  city  of  Chicago.” 
The  city  was  given  the  option  to  purchase  the  plant  at  an}^ 
time  within  one  year  after  the  report  of  the  appraisers  had 
been  made.  It  was  provided  that  if  the  company  should  fail 
to  receive  the  contract  for  carrying  the  United  States  mails 
at  the  expiration  of  any  existing  contract,  then  the  city  should 
have  the  right  to  require  the  company  to  sell  its  plant  to 
any  other  person,  firm  or  corporation  receiving  the  Govern¬ 
ment  contract  on  the  same  terms  as  were  provided  in  case 
of  purchase  by  the  city.  At  the  expiration  of  the  franchise, 
the  company’s  tubes  then  in  the  streets  were  to  become  the 
absolute  property  of  the  city,  and  the  company  agreed  to 
convey  the  tubes,  free  of  all  liens  or  encumbrances,  to  the 
city  of  Chicago  or  to  any  person,  firm  or  corporation  that 
might  be  selected  by  the  city.  Upon  the  acceptance  of  the 
ordinance,  the  company  was  required  to  deposit  the  sum  of 
$50,000  in  cash  or  negotiable  securities  to  guarantee  the  com¬ 
pletion  of  the  first  eight  miles  of  its  tubes  within  the  time 
required  by  the  ordinance.  The  company  was  also  compelled 
to  file  a  bond  in  the  penal  sum  of  $50,000  to  guarantee  its 
compliance  with  the  terms  and  conditions  of  the  franchise  and 
to  indemnify  the  city  against  all  liability  for  damages  on 
account  of  the  exercise  of  the  company’s  privileges. 

An  annual  three  per  cent  tax  on  the  company’s  gross 
revenues  for  the  first  four  years  of  the  life  of  the  ordinance 
and  a  five  per  cent  tax  for  the  remaining  sixteen  years,  was 
imposed.  In  addition  to  this  payment,  the  company  was  re¬ 
quired  at  the  same  time  it  constructed  its  pipe  line  between 
Harrison  Street  and  the  sub-postal  station  at  the  stock  3rards, 
to  place  in  the  same  trench  with  its  pneumatic  tubes  two 
vitrified  clay  conduits,  three  inches  in  diameter,  such  conduits 
to  be  installed  without  expense  to  the  city  and  to  be  the  prop¬ 
erty  of  the  city  for  its  sole  use.  This  ordinance  was  to  be 
accepted  within  ninety  days.  The  company  waited  until 
October  12,  1903,  the  full  period  of  ninety  days,  before  filing 
its  acceptance. 

241.  Compressed  air  franchise— Dallas,  Texas. — On  May 

28,  1908,  a  franchise  was  granted  by  the  board  of  commis¬ 
sioners  of  the  city  of  Dallas  to  J.  Ford  House,  his  associates 


524 


MUNICIPAL  FRANCHISES. 


and  assigns,  to  construct,  acquire,  maintain  and  operate  a 
plant  for  the  manufacture  of  compressed  air,  and  to  construct 
and  maintain  pipes  and  mains  with  all  necessary  connections 
along  and  across  the  streets  of  the  city  below  the  surface  for 
a  period  of  twenty  years.1  This  franchise  contained  a  clause 
to  the  effect  that  the  grantees  “  upon  the  request  of  any 
citizen  of  the  city  of  Dallas  whose  premises  are  located  along 
the  route  of  any  main  or  supply  pipe  of  the  said  grantees, 
shall  construct  a  service  pipe  of  proper  size  and  capacity,  to 
furnish  such  person  with  connection  with  the  mains  and 
supply  pipes  of  the  said  grantees.”  The  service  pipe  was  to 
extend  from  the  supply  pipe  to  the  curb  line.  It  was  pro¬ 
vided,  however,  that  the  grantees  should  not  be  compelled  to 
furnish  service  or  extend  a  service  pipe  to  any  premises  more 
than  three  hundred  feet  distant  from  the  nearest  main,  unless 
it  should  seem  to  the  board  of  commissioners,  upon  proper 
proof,  that  such  extension  might  be  required,  “  without  inflict¬ 
ing  upon  the  said  grantees  any  unreasonable  expense  or  cost,” 
in  which  case  the  service  was  to  he  furnished  as  directed  by 
the  commissioners.  In  all  cases,  however,  the  grantees  were 
to  have  a  full  opportunity  to  be  heard  upon  the  question 
whether  such  service  should  be  furnished  or  not. 

The  grantees  were  authorized  to  charge  consumers  such 
rates  as  should  be  agreed  upon  by  contract,  “  provided  equal 
and  uniform  service  shall  be  extended  to  the  citizens  of  the 
city  of  Dallas,  and  such  citizens  shall  be  served  at  equal  and 
uniform  rates,  quality  and  pressure  considered.”  It  was 
further  provided  that  the  board  of  commissioners  should,  at 
all  times,  have  the  right  as  provided  in  the  city  charter  to 
regulate  and  lower  the  rates.  It  was  stipulated  that  a  dis¬ 
count  of  ten  per  cent  should  be  allowed  for  payment  on  or 
before  the  tenth  day  of  any  month  for  the  service  rendered 
during  the  preceding  month.  As  compensation  for  the  fran¬ 
chise,  the  grantees  were  required  to  pay  to  the  city  four  per 
cent  of  their  gross  receipts  from  the  business  of  furnishing 
compressed  air  through  pipes  and  mains  situated  in  the  streets 
and  public  places.  But  this  gross-receipts  payment  was  not 
to  be  required  until  after  the  expiration  of  the  first  three 
years  of  the  franchise  period. 

The  grantees  were  forbidden  at  any  time  during  the  period 

1  Franchise  Ordinances  of  Dallas,  1908,  p,  296. 


PNEUMATIC  TUBE  FRANCHISES. 


525 


of  their  franchise  to  “  consolidate  or  combine  either  directly 
or  indirectly  with  any  other  person,  firm,  or  corporation  with¬ 
in  the  city  of  Dallas,  or  elsewhere,  engaged  in  the  business 
of  furnishing  or  trying  to  furnish  compressed  air  or  other 
power  or  means  used  for  the  purpose  of  manufacturing  fuel 
or  illuminating  gas  within  the  city  of  Dallas.”  The  grantees 
were  also  forbidden  to  purchase  the  property,  rights,  or  fran¬ 
chises  of  any  one  else  engaged  in  such  business.  It  was 
provided  that  any  arrangement  establishing  a  community  of 
interest  either  directly  or  indirectly  tending  to  regulate  the 
rates  to  be  charged  by  the  company  for  compressed  air  or 
other  power  or  means  used  for  the  purpose  of  manufacturing 
fuel  or  illuminating  gas  within  the  city  of  Dallas  should  be 
construed  to  be  a  combination  within  the  meaning  of  the 
section. 

The  pipes  laid  under  the  franchise  were  to  be  from  one  to 
ten  inches  in  diameter.  The  system  used  was  to  consist  of  a 
single  pipe  line  of  standard  galvanized  iron  or  standard 
wrought  iron  or  steel  pipe.  A  power  plant  was  to  be  com¬ 
pleted  and  a  distributing  system  installed  along  at  least  fifteen 
blocks  in  the  city  within  a  period  of  eighteen  months.  The 
grantees  were  required  to  make  a  cash  deposit  of  $1,000  to 
be  held  by  the  city  until  the  terms  of  the  franchise  relating 
to  the  construction  of  the  power  plant  and  distributing  system 
had  been  complied  with.  The  grantees  were  authorized  to 
transfer  the  franchise  at  any  time  within  sixty  days  after  its 
acceptance  to  a  corporation  to  be  organized  under  the  laws  of 
the  state  of  Texas  and  to  have  its  place  of  business  in  the  city 
of  Dallas. 

242.  Waste  water  power  utilized  to  operate  a  compressed 
air  plant— Richmond,  Va — On  May  16,  1898,  a  franchise 
was  granted  by  the  council  of  Richmond  to  a  number  of 
individuals  authorizing  them,  so  far  as  the  city  had  the  right 
to  make  the  grant,  to  use  the  waste  water  flowing  from  the 
fore-bay  of  the  city’s  new  pump  works,  so  far  as  this  water 
was  not  needed  for  the  city’s  water  supply  or  for  operating 
its  present  machinery  at  its  maximum  capacity.1  The  waste 
water  was  to  be  used  “  for  the  purposes  of  power,  cooling,, 
refrigerating  and  ventilation.”  The  grant  was  made  on  the 
express  condition  that  after  the  expiration  of  five  years  the 

1  Franchises ,  etc.,  Richmond,  op.  cit.,  p.  236. 


526 


MUNICIPAL  FRANCHISES. 


city  council  might  at  any  time  revoke  the  franchise  so  far  as 
it  related  to  the  use  of  surplus  water.  It  was  also  provided 
that  if  at  any  time  during  the  five  years  the  superintendent  of 
water  works  should  be  of  the  opinion  that  the  city  had  need 
of  any  of  the  surplus,  the  grantees  would  be  required  to 
furnish  the  city  free  of  charge  sufficient  power  to  operate  the 
steam  pump  at  the  water  works  “  to  such  capacity  as  the 
said  superintendent  may  determine,  and  as  long  as  he  may 
deem  it  necessary.”  In  case  they  failed  for  a  period  of  48 
hours  to  furnish  sufficient  power,  the  superintendent  was 
immediately  to  prevent  any  further  use  by  them  of  the  surplus 
water  or  such  part  of  it  as  the  committee  on  water  should 
deem  necessary  for  the  city’s  needs. 

It  was  provided  that  the  grantees  should  organize  a  corpora¬ 
tion  within  twelve  months  from  the  approval  of  the  franchise. 
They  were  given  the  right  to  transfer  all  their  privileges 
under  or  by  virtue  of  this  ordinance  to  the  corporation  so 
organized.  The  grantees  were  expressly  authorized  to  “  con¬ 
struct  and  lay  pipes  for  the  distribution  of  air  power  and  for 
cooling,  refrigerating  and  ventilating  purposes  ”  along  certain 
streets.  The  location,  materials  and  manner  of  construction 
of  the  pipes  and  fixtures  of  the  grantees  were  to  be  according 
to  the  decision  of  the  city  engineer,  subject  to  the  approval  of 
the  committee  on  streets.  The  city  was  to  be  indemnified 
against  any  damages  resulting  from  the  operation  of  the 
franchise. 

The  franchise  for  the  use  of  the  surplus  water  was  to  con¬ 
tinue  for  20  years,  unless  sooner  revoked.  The  franchise  for 
maintaining  pipes  in  the  streets  was  for  a  period  of  30  years. 
The  grantees  were  authorized  to  make  and  use  all  proper  con¬ 
nections  found  by  them  necessary  along  their  various  routes. 
It  was  stipulated  that  work  upon  the  construction  of  the 
plant  to  be  established  by  the  grantees  should  be  begun  within 
six  months  after  the  approval  of  the  ordinance,  and,  including 
the  laying  of  the  pipes  from  the  plant  to  the  corporate 
limits,  the  work  was  to  be  so  far  completed  as  to  enable  the 
grantees  to  furnish  at  least  400  horse-power  within  one  year 
after  the  approval  of  the  franchise,  such  energy  to  be  dis¬ 
tributed  within  the  city  limits.  All  compressed  air  generated 
from  the  use  of  the  surplus  water  obtained  from  the  city  was 
to  be  distributed  and  used  within  the  city.  It  was  provided 


PNEUMATIC  TUBE  FRANCHISES. 


527 


that  if  the  grantees  were  hindered  or  delayed  in  doing  or 
completing  the  work  within  the  periods  above  specified  “  by 
reason  of  any  extraneous  or  impersonal  cause  ”  they  were  to 
be  given  a  corresponding  additional  allowance  of  time. 

The  grantees  were  required  to  pay  the  city  $5000  a  year 
for  the  use  of  the  surplus  water  granted  to  them.  The 
amount  of  this  surplus  was  estimated  at  the  time  as  being  400 
cubic  feet  of  water  per  second.  In  lieu  of  all  other  franchise 
taxes  and  taxes  upon  their  fixtures,  the  grantees  agreed  to 
pay  for  the  franchise,  quarterly  into  the  city  treasury,  until 
January  1,  1909,  a  sum  equal  to  3%  of  their  gross  earnings 
from  furnishing  compressed  air  for  power.  The  council  re¬ 
served  the  right  to  increase  this  payment  up  to  a  maximum 
of  5%  at  any  time  after  January  1,  1909.  These  money 
obligations  of  the  company  to  the  city  were  to  be  a  first  lien 
upon  all  the  company’s  works,  machinery,  pipes  and  fixtures. 
For  failure  to  make  any  of  the  payments  within  ten  days 
after  they  became  due,  they  were  to  be  subject  to  a  fine  of 
from  $10  to  $100  for  each  day’s  failure.  In  case  the  grantees 
continued  for  thirty  days  in  default  on  any  such  payment,  the 
city  council  could  at  any  time  order  them  to  cease  using  water 
or  pipes  or  both  until  payment  has  been  made.  If  the  com¬ 
pany,  having  received  such  notice,  should  after  the  expira¬ 
tion  of  48  hours  from  that  time  continue  to  use  the  water  or 
to  disregard  the  notice,  it  would  be  liable  to  a  fine  of  not 
less  than  $10  or  more  than  $500  per  day. 

Before  commencing  work,  and  within  ninety  days  from  the 
approval  of  the  ordinance,  the  grantees  were  to  deposit  with 
the  city  treasurer  $5,000  worth  of  city  or  United  States  bonds. 
This  deposit  was  to  be  used  as  a  penalty  fund.  Whenever, 
under  the  terms  of  the  ordinance,  the  grantees  should  be 
required  to  stop  using  the  surplus  water  of  the  city,  it  was 
stipulated  that  they  should  remove  from  the  city’s  land  and 
from  the  land  of  the  railroad  company  used  by  the  city,  all 
parts  of  their  plant,  including  houses,  or  should  fill  all  wrells 
dug  for  the  compression  of  air.  In  case  the  grantees  should 
cease  to  furnish  compressed  air  to  consumers  for  a  period  of 
sixty  days,  then  the  franchise  was  to  come  to  an  end  and  the 
grantees  were  to  remove  from  the  streets  all  their  pipes  and 
fixtures.  Any  failure  to  comply  with  the  requirements  of  the 
ordinance,  or  with  any  other  requirements  thereafter  legally 


528 


MUNICIPAL  FRANCHISES. 


imposed  by  the  city  for  the  carrying  out  of  the  terms  and 
conditions  of  the  ordinance,  excepting  those  particular  failures 
for  which  a  specific  fine  had  been  agreed  upon,  would  be 
subject  to  a  fine  of  not  less  than  $10  and  not  more  than 
$500. 


CHAPTER  XVIII. 

OIL  PIPE  LINE  FRANCHISES. 


243.  Pipe  lines  for  local  distribution.—  244.  Pipe  lines  for  through  distribution. 

Cleveland.  —Toledo  and  Jersey  City. 

245.  A  fuel  oil  franchise.— Dallas. 

243.  Pipe  lines  for  local  distribution— Cleveland. — While 
the  construction  and  operation  of  pipe  lines  for  the  transporta¬ 
tion  of  oil  from  the  wells  to  the  refineries  and  from  the  oil 
fields  to  the  seaboard  is  an  enterprise  of  national  importance, 
which  in  all  respects  partakes  of  the  nature  of  a  public  utility, 
the  operation  of  such  lines  for  local  distribution  is  extremely 
limited.  A  number  of  franchises,  however,  have  been  granted 
by  the  city  of  Cleveland  to  the  Standard  Oil  Company 
requiring  the  distribution  of  oil  as  a  local  public  utility. 
These  franchises  were  granted  in  1891  and  1892,  and  provided 
for  the  laying  of  pipe  lines  through  certain  specified  streets.1 
In  three  cases,  the  size  of  the  pipe  is  limited  to  a  diameter  of 
four  inches,  while  in  the  fourth  franchise  the  size  is  limited 
to  six  inches.  The  depth  at  which  the  pipes  were  to  be  laid 
was  made  subject  to  the  will  of  the  Director  of  Public  "Works 
and  it  was  expressly  stipulated  that  the  pipes  should  be  so 
laid  as  not  to  interfere  with  sewers,  water  mains  or  gas  pipes. 
In  one  grant  it  was  provided  that  the  pipe  lines  should  be 
used  for  conveying  crude  oil  from  the  company’s  works  to 
the  manufacturing  establishments  situated  along  the  route  of 
the  Lake  Shore  and  Michigan  Southern  Railroad.  In  another 
case  it  was  specified  that  the  crude  oil  carried  in  the  pipe  lines 
was  to  be  used  for  fuel  purposes.  In  the  other  two  franchises 
the  company  was  to  furnish  fuel  oil  conveyed  through  its 
pipes  to  all  manufacturers  applying  for  it,  whose  establish¬ 
ments  were  located  “upon  or  in  the  vicinity  of  any  of  the 
streets  through  or  across  which  ”  the  pipes  were  laid.  It 
was  also  provided  that  the  oil  should  be  furnished  “  without 


1  Special  Ordinances,  City  of  Cleveland,  1907,  pp.  28-34. 

529 


530 


MUNICIPAL  FRANCHISES. 


discrimination  in  rates.”  In  one  franchise  it  was  stipulated 
that  the  company  should  “  make  such  change  in  location, 
grade  or  construction  of  said  pipe  line  at  its  own  expense 
as  shall  be  ordered  from  time  to  time  by  the  Board  of  Con¬ 
trol,  and  the  use  of  said  pipe  line  shall  be  discontinued,  and 
the  same,  or  any  portion  thereof,  removed  from  the  street 
by  said  Standard  Oil  Company,  at  thirty  days’  notice  so  to 
do  by  the  Board  of  Control  and  the  City  Council,  and  the 
condition  of  the  streets  restored  by  said  Standard  Oil  Com¬ 
pany  at  its  own  expense,  to  the  satisfaction  of  the  Board  of 
Control  and  the  Director  of  Public  Works.”  Substantially 
similar  provisions  were  contained  in  all  the  other  grants. 
The  company  was  not  authorized  to  undertake  any  repairs 
on  its  pipe  lines  without  the  permission  of  the  Director  of 
Public  Works,  and  the  company  agreed  to  pay  all  damages 
that  migl^t  be  done  to  abutting  property  owners  in  connection 
with  its  work  and  to  indemnify  the  city  for  any  liabilities 
resulting  from  the  laying  of  the  company’s  pipes.  A  bond 
of  $5,000  or  $10,000  was  required  in  each  case.  In  one  of 
the  franchises  it  was  stipulated  that  in  crossing  certain  streets 
underneath  the  paving,  the  pipes  should  be  laid  by  forcing 
them  through  without  removing  the  pavement  or  in  such 
other  manner  as  should  be  designated  by  the  Director  of 
Public  Works. 

244.  Pipe  lines  for  through  distribution— Toledo  and 
Jersey  City. — On  October  13,  1890,  an  ordinance  was  passed 
by  the  city  of  Toledo,  granting  to  the  Paragon  Defining  Com¬ 
pany  the  right  to  construct,  maintain  and  operate  “  a  system 
of  tubing  and  pipes  for  the  purpose  of  conducting,  piping 
and  transporting  crude  petroleum  or  mineral  oil,  together 
with  the  necessary  feeders,  shut-offs,  stop-cocks  and  other 
necessary  devices  for  the  successful  operation  ”  of  its  pipe 
line  in  certain  streets  of  the  city.1  It  was  expressly  provided 
that  the  right  and  privilege  derived  from  this  ordinance 
should  be  subject  to  any  general  statutes  of  the  state  then 
in  force  or  thereafter  enacted  and  to  any  general  ordinances 
of  the  city  that  might  be  thereafter  passed  regulating  the 
mode  of  laying,  relaying  or  repairing  pipes  and  other  devices 
in  use  by  the  company  and  the  conducting  of  oils  through 
the  streets  in  so  far  as  such  statutes  and  ordinances  were 

1  Special  Ordinances,  op.  cit.,  p.  57. 


OIL  PIPE  LINE  FRANCHISES. 


531 


not  inconsistent  with  the  provisions  of  this  ordinance.  It 
was  provided  that  the  company  should  get  a  written  permit 
from  the  City  Civil  Engineer  before  proceeding  to  take  up, 
relay  or  repair  any  portion  of  its  pipe  line.  However,  in 
case  of  emergency  arising  from  accident  and  requiring  im¬ 
mediate  action,  the  company  was  not  required  to  get  a  permit 
in  advance,  but  was  required  to  make  a  report  of  the  work 
done  to  the  City  Civil  Engineer.  It  was  stipulated  that  if 
the  company  should  fail  or  refuse  to  comply  with  the  condi¬ 
tions  of  the  franchise  or  with  any  general  statute  or  ordinance 
relative  to  the  construction  of  pipe  lines  and  the  piping  of 
oil,  so  far  as  the  provisions  of  such  law  or  ordinance  should 
be  applicable  to,  and  not  inconsistent  with  the  franchise,  the 
company’s  rights  and  privileges  should  be  forfeited  and  the 
city  should  have  the  right  to  re-enter  and  take  possession  of 
them  to  the  exclusion  of  the  company.  Another  franchise 
similar  to  this  one  had  been  granted  to  the  same  company 
for  other  streets  only  two  weeks  earlier. 

Another  instance  of  a  grant  for  an  oil  pipe  line  franchise 
for  passing  through  a  city  without  rendering  local  service  is 
found  in  the  case  of  an  ordinance  passed  Nov.  22,  1881, 
by  the  common  council  of  Jersey  City  over  the  mayor’s  veto.1 
By  this  grant  permission  was  given  to  the  Standard  Oil 
Company  to  lay,  maintain,  operate  and  repair  pipe  lines 
beneath  the  surface  of  certain  specified  streets  for  the  purpose 
of  conveying  “  crude  petroleum  oil.”  The  company  was 
required  not  to  disturb  or  injure  in  any  manner  any  water 
or  gas  pipes  or  public  or  private  sewers  already  laid  or 
thereafter  to  be  laid  in  the  streets  of  the  city.  The  company 
was  required  to  fill  in  and  repair  all  excavations  made  by  it. 
The  company  was  also  to  execute  a  bond  in  the  sum  of 
$10,000  to  guarantee  its  compliance  with  the  conditions  of  the 
ordinance.  The  city  was  to  be  indemnified  against  damages 
resulting  from  operation  under  the  franchise.  The  company’s 
pipes  were  to  be  kept  at  all  times  buried  at  least  two  feet 
below  the  established  grade  of  the  streets  in  which  they  were 
laid. 

245.  A  fuel  oil  franchise— Dallas. — On  March  24,  1902, 
the  city  of  Dallas  granted  to  C.  L.  Wakefield  and  his  associates 
the  right  to  construct  and  operate  a  pipe  line  “  for  the  conduct 

1  Griffiths’  Revised  Ordinances  of  Jersey  City,  op.  cit p.  236. 


532 


MUNICIPAL  FRANCHISES. 


of  oil  for  fuel  purposes  ”  under  all  the  streets  of  the  city, 
with  one  exception.1  Pipes  laid  under  this  franchise  were 
to  be  placed  at  a  depth  of  not  less  than  22  inches  below  the 
surface  of  the  earth.  Before  the  construction  and  laying  of 
any  pipe,  the  grantees  were  required  to  deposit  with  the  City 
Engineer  an  amount  fixed  by  that  official  to  insure  the  restora¬ 
tion  of  the  surface  of  the  street  to  its  former  condition.  In 
case  the  grantee  failed  to  do  the  work,  the  City  Engineer 
was  authorized  to  do  it  and  deduct  the  expense  from  the 
deposit  which  had  been  provided  for.  It  was  stipulated  that 
“  it  shall  be  the  duty  of  the  owners  of  the  franchise  to  furnish 
service  to  all  parties  demanding  the  same  whose  premises 
may  be  situated  along  the  line  that  the  said  pipe  shall  run, 
and  connections  shall  be  made  within  not  more  than  thirty 
days  from  the  time  the  request  is  made  for  the  same,”  pro¬ 
vided  that  the  person  demanding  service  shall  deposit  with 
the  owner  of  the  franchise  an  amount  to  cover  the  expense 
of  making  the  connection,  and  it  shall  be  the  duty  of  the 
owner  of  the  franchise  to  give  a  rebate  to  the  person  demand¬ 
ing  such  service  to  the  amount  of  the  expense  and  cost  out 
of  the  first  service  rendered.”  The  owners  of  the  franchise 
were  required  to  “  immediately  indemnify  ”  the  city  against 
damages  resulting  from  the  construction  or  maintenance  of 
the  pipe  lines.  The  grantees  were  required  to  pay  to  the 
city  in  advance  $50  for  each  2,000  feet  of  main  line  or 
fractional  part  of  that  amount  constructed.  The  franchise 
was  to  be  accepted  in  writing  within  fifteen  days  after  its 
passage  and  was  to  remain  in  effect  for  a  period  of  ten  years, 
subject  to  the  provisions  of  the  city  charter  and  ordinances. 


1  Franchise  Ordinances  of  Dallas,  1908,  p.  294. 


CHAPTER  XIX. 

ARTIFICIAL  AND  NATURAL  GAS  AS  PUBLIC  UTILITIES. 


246.  History  of  artificial  gas  as  a  public  248.  Natural  gas  for  heating  and  light- 

utility.  ing. 

247.  Special  features  of  gas  franchises.  249.  Artificial  and  natural  gas  franchises 

compared. 

246.  History  of  artificial  gas  as  a  public  utility. — Aside 
from  the  supply  of  water,  gas  is  the  oldest  of  the  important 
public  utilities.  It  is  said  that  it  was  first  used  for  lighting 
about  1804  or  1805  in  Manchester,  England,  and  in  1813 
was  used  for  lighting  London  Bridge.1  In  this  country  a 
man  living  at  Newport,  R.  I.,  lighted  his  premises  with  coal 
gas  as  early  as  1806.  A  gas  company  was  organized  for 
public  lighting  in  Baltimore  in  1816.  Companies  were 
organized  for  Boston  and  New  York  in  1822  and  1823  and 
for  Brooklyn  and  Bristol,  R.  I.,  in  1825.  New  Orleans  fol¬ 
lowed  with  a  gas  company  in  1835.  “  A  glance  at  the  early 

history  of  these  pioneer  companies,  as  far  as  it  is  available, 
indicates  a  series  of  failures,”  writes  Arthur  L.  Hunt  in  the 
census  report  for  1900.2  “  Not  only  was  it  a  difficult  matter 

to  secure  the  necessary  capital  to  erect  and  operate  a  plant, 
but  for  some  time  the  introduction  of  gas  was  strongly 
opposed  on  the  ground  that  the  erection  of  gas  works  and  the 
distribution  of  the  product  endangered  the  health  and  lives 
of  the  inhabitants  of  the  surrounding  communhy.”  This 
opposition,  however,  was  overcome  and  the  companies  secured 
the  necessary  franchises.  Referring  to  the  lighting  of  the 
first  public  gas  lamp  in  Boston  on  January  1,  1829,  Mr.  J.  L. 
Richards  says :  “  The  inauguaration  of  the  use  of  gas  as  a 

medium  for  lighting  was  the  occasion  of  a  great  demonstra¬ 
tion  at  which  the  mayor  of  Boston  and  the  aldermen  made 
speeches  of  congratulation  to  the  gentlemen  in  charge  of  the 

1  J.  L.  Richards,  in  Annals  of  the  American  Academy  of  Political  and  Social 
Science.  May,  1908,  vol.  31,  p.  59. 

*  Twelfth  Census,  vol.  x.,  Manufactures .  Pt.  4.,  p.  713. 

533 


534 


MUNICIPAL  FRANCHISES. 


gas  company,  and  promised  them  every  assistance  to  increase 
the  growth  of  their  enterprise.”1  The  enterprise  developed 
slowly  in  Boston,  however,  for  nearly  ten  years  later  the  city 
had  only  twenty  gas  lamps.  The  number  was  increased, 
however,  early  in  1839  to  180,  and  steadily  grew  till  on  July  1, 
1907,  the  number  of  public  gas  lamps  in  Boston  was  10,182. 
The  price  of  gas  when  the  supply  was  first  undertaken  in 
Boston  was  $5  per  1000  cubic  feet,  and  was  gradually  reduced 
till  on  April  1,  1879,  it  was  $2,  and  on  July  1,  1907,  80  cents.2 
In  Norfolk,  Va.,  where  gas  was  first  introduced  in  1865,  the 
gross  price  was  $6  and  the  net  price  $5  per  1000  cubic  feet. 
On  April  1,  1906,  the  gross  and  net  prices  were  just  one-fifth 
of  these  amounts.3  In  Atlanta,  Ga.,  the  maximum  price  of 
gas  was  fixed  by  contract  in  1855  at  50  cents  per  100  cubic 
feet.  The  price  was  reduced  from  time  to  time  until  1891, 
when  it  reached  $1.10  per  1000  cubic  feet  with  a  discount  of 
10  cents  for  prompt  payment.4 

According  to  the  Federal  census  for  1850,  there  were  at 
that  time  thirty  plants  for  the  manufacture  of  gas  with  a 
total  capital  of  $6,674,000  and  an  output  for  the  year  worth 
$1,921, 746. 5  Fifty  years  later  the  number  of  plants  had 
increased  to  877;  the  investment  to  $567,000,000,  and  the 
annual  value  of  products  to  more  than  $75,000,000.  Artificial 
gas  has  been  compelled  to  meet  competition  in  various  forms 
for  lighting  and  heating.  The  development  of  the  petroleum 
industry  in  the  middle  of  the  nineteenth  century  brought  kero¬ 
sene  oil  into  general  use  and  greatly  retarded  the  increase  in 
the  use  of  gas.  Later  electricity  was  introduced  and  became 
an  active  and  powerful  competitor  in  the  lighting  business. 
Still  later,  natural  gas  was  piped  to  many  cities,  and  in  some 
cases  has  entirely  driven  out  the  artificial  product.  In  1900 
out  of  1653  cities  and  towns  of  more  than  2500  population, 
827  had  gas  manufacturing  plants  and  826  did  not.  The 
entire  number  of  artificial  gas  plants  reported  was  877,  of 
which  269,  or  30.7%,  were  being  operated  in  connection  with 
electric  light  plants.  The  total  value  of  manufactured  gas 
sold  in  1900  was  $69,432,582.®  The  value  of  by-products 
sold,  including  tar,  coke  and  ammonia,  was  $4,283,000,  and  the 

1  “  The  Boston  Consolidated  Gas  Co.,”  Annals ,  op.  cit.,  p.  61. 

2  Ibid .,  p.  61. 

3  National  Civic  Federation  Report,  Pt.  2,  Vol.  I.,  p.  470. 

4  Ibid. ,  p.  480. 

6  Twelfth  Census,  Vol.  X.,  p.  705.  •  Ibid.,  p.  712. 


ARTIFICIAL  AND  NATURAL  GAS. 


535 


income  from  renting  stoves  and  the  sale  of  appliances  was  ap¬ 
proximately  $2,000,000.  The  total  amount  of  gas  sold  for 
lighting  and  heating  was  more  than  67  billions  of  cubic  feet, 
and  the  average  price  realized  for  the  whole  country  was 
$1,035  per  1000  cubic  feet.  Variations  in  the  average  price 
in  different  sections  of  the  country  were  shown  as  follows  i1 


New  England  States 

$1,176 

Middle  States 

.962 

Southern  States 

1.426 

Central  States 

.972 

Western  States 

1.492 

Pacific  States 

1.745 

The  United  States  Geological  Survey  Report  for  1907  gives 
returns  for  the  manufacture  of  coal  gas  and  water  gas 
separately.2  These  returns,  however,  include  not  only  gas 
works  of  the  ordinary  type,  but  coke  ovens  of  which  gas  is 
a  by-product.  Returns  were  received  in  that  year  from  516 
companies  manufacturing  coal  gas  and  520  companies  manu¬ 
facturing  water  gas.  The  total  output  of  coal  gas  sold  was 
approximately  55  billions  of  cubic  feet,  of  which  approximately 
5/9  was  consumed  for  light  and  4/9  for  fuel.  The  average 
price  realized  was  67  cents  per  1000,  this  low  average  being 
brought  about  through  the  great  increase  of  coke  oven  gas 
sold  for  fuel  for  industrial  purposes  at  a  very  low  rate.  The 
entire  value  of  coal  gas  manufactured  in  1907  was  about 
$36,500,000.  Of  oil  and  water  gas  there  was  manufactured 
and  sold  approximately  95  billions  of  cubic  feet,  of  which 
a  little  more  than  ^4  was  used  for  light  and  the  rest  for 
fuel.  The  total  value  of  the  water  gas  was  $90,000,000,  the 
average  price  being  95  cents,  and  being  practically  the  same 
for  both  light  and  fuel. 

Figures  for  by-products  from  coke  ovens  are  not  given 
separately.  Taking  the  coal  gas  works  and  colse  ovens  to¬ 
gether,  the  amount  and  value  of  the  various  products  were  as 
follows : 

Coke;  amount  8,093,140  tons,  value  $30,332,644. 

Coal  tar;  amount  103,577,760  gallons,  value  $2,651,527. 

Ammoniacal  liquor ;  amount  54,066,541  gallons;  value  $1,128,176. 

Anhydrous  ammonia;  amount  16,556,995  pounds;  value  $1,472,881. 

Ammonium  sulphate;  amount  48,882,237  pounds;  value  $1,525,472. 

1  Twelfth  Census,  Vol.  X.,  p.  712.  In  the  Census  table  there  is  an  evident  error 
in  the  average  price  for  the  Middle  States,  which  I  have  corrected. 

1  See  pp.  291  to  322. 


536 


MUNICIPAL  FRANCHISES. 


Total  value  of  by-products,  $37,110,700. 

Total  value  of  coal  gas  manufactured,  $36,462,304. 

247.  Special  features  of  gas  franchises. — Gas  has  long 

been  regarded  as  one  of  the  most  profitable  of  public  utilities. 
The  amount  of  gas  stocks  outstanding  in  1900  was  almost 
double  the  amount  of  bonds  outstanding.  As  a  matter  of 
fact,  gas  stocks  are  usually  regarded  as  safe  investments.  They 
do  not  by  any  means  represent  in  all  cases  actual  cash  paid 
in  by  the  stockholders.  They  have,  however,  quite  generally 
been  given  real  value  either  by  the  re-investment  of  profits, 
by  the  appreciation  of  real  estate  and  street  mains,  or  simply 
by  long-continued  payment  of  dividends.  In  the  granting  of  a 
gas  franchise,  therefore,  a  city  has  to  deal  with  a  long-estab¬ 
lished  utility  in  which  the  possibility  of  profits  under 
monopoly  are  very  great.  The  question  of  rates,  coupled  with 
heat-giving  and  light-giving  quality  and  pressure,  is  one  of 
paramount  importance.  In  communities  where  incandescent 
mantles  are  in  general  use  the  candle-power  of  the  gas  is  unim¬ 
portant.  The  light  results  from  the  heating  of  the  mantle,  and 
accordingly  a  gas  with  a  very  low  candle-power  and  of  high 
heating  quality  is  better  for  illumination  where  mantles  are 
used  than  a  gas  of  a  much  higher  candle-power  and  lower  heat¬ 
ing  value  would  be.  Inasmuch  as  the  light  from  incandescent 
mantles  is  vastly  better  and  more  economical  than  the  light 
from  the  naked  gas  flame  no  matter  how  good  the  gas  may 
be,  it  is  important  to  encourage  the  use  of  mantels  and  lay 
emphasis  on  the  heat-unit  value  of  the  gas.  In  this  way 
the  interests  of  the  consumer  using  gas  for  lighting,  heating 
and  cooking  will  be  harmonized.  It  is  believed  that  the  heat 
value  of  gas  should  not  be  less  than  590  or  600  British 
Thermal  Units,  while  under  the  conditions  mentioned  an 
illuminating  value  of  16  candle  power  is  sufficient.  The 
difference  in  cost  to  the  consumer  as  between  a  16  candle 
power  gas  and  a  22  candle  power  gas  would  probably  be 
not  less  than  ten  cents  per  1000  feet.  If  the  price  of  mantles 
can  be  reduced  to  a  reasonable  figure,  every  consideration  of 
public  policy  points  to  the  desirability  of  securing  cheaper 
gas  even  at  the  sacrifice  of  candle  power.1  Gas  franchises 
have  been  more  frequently  exclusive  in  terms  than  grants 
for  any  other  class  of  public  utilities  except  water  works.  It 

1  See  National  Civic  Federation  Report,  1907,  op.  cit.,  Pt.  1,  Vol.  I.,  p.  208. 


ARTIFICIAL  AND  NATURAL  GAS. 


537 


is  not  easy  to  explain  just  why  this  should  be  so,  unless  on 
account  of  the  fear  of  the  multiplication  of  nuisances.  A  gas 
plant  is  recognized  as  a  disagreeable  neighbor  in  any  residence 
section  of  a  city.  The  multipication  of  gas  pipes  in  the  streets 
with  the  possibility  of  leaks  and  consequent  disintegration 
of  pavements,  destruction  of  trees  and  explosions  in  man-holes, 
seems  in  many  cases  to  have  appealed  to  the  city  authorities 
as  worse  than  the  dangers  of  monopoly.  Particular  care 
should  be  taken  in  every  gas  franchise  adequately  to  protect 
the  property  of  the  city  and  the  property  and  lives  of  the 
people  against  the  dangers  inherent  in  the  distribution  of 
gas.  Not  the  least  important  of  these  is  the  danger  of 
asphyxiation  through  leaky  fixtures.  Slight  leaks  coupled 
with  the  impoverishment  of  the  air  resulting  from  combus¬ 
tion  in  all  likelihood  will  gradually  affect  the  health  and 
vigor  of  the  citizens  unless  especial  care  is  taken.  Aside 
from  the  problem  of  rates  and  the  problem  of  danger,  there 
is  the  specially  difficult  problem  of  uniform  pressure  with  a 
constant  supply  ready  to  meet  the  heaviest  demand  for  both 
lighting  and  heating.  Elaborate  provision  is  necessary  for 
the  regulation  of  pressure  and  the  inspection  and  testing  of 
gas  by  the  municipal  authorities.  Gas  pipes,  like  water 
mains,  should  be  laid  below  the  frost  line  to  prevent  freezing. 
It  is  also  especially  important  in  gas  franchises  that  the  con¬ 
sumer  should  be  protected  in  the  matter  of  the  accuracy  of 
meters,  the  laying  of  service  pipes  and  the  furnishing  and  care 
of  fixtures. 

248.  Natural  gas  for  heating  and  lighting. — It  is  said  that 
natural  gas  was  used  as  early  as  1821  to  light  the  village  of 
Fredonia,  N.  Y.1  It  was  not,  however,  until  about  1883 
that  the  natural  gas  industry  developed  any  importance  as  a 
public  utility.  The  supply  of  natural  gas  so  far  as  it  has  been 
discovered,  is  limited  for  the  most  part  to  a  few  states,  of 
which  Pennsylvania,  Ohio,  Indiana,  West  Virginia  and  Kansas 
are  the  most  important.  The  development  of  the  natural 
gas  industry  for  a  few  years  after  1883  was  extremely  rapid. 
It  is  estimated  that  more  natural  gas  was  used  in  1888  than 
in  any  single  year  since  that  time.  The  estimate  for  that 
year  is  750  billions  of  cubic  feet,  which  is  five  times  as  much 
as  the  entire  output  of  artificial  gas  in  the  year  1907.  Owing 

1  Special  Reports  of  the  Census  Office,  “  Mines  and  Quarries ,  1902 p.  773. 


538 


MUNICIPAL.  FRANCHISES. 


to  the  enormous  pressure  developed  when  the  natural  gas 
reservoirs  of  the  earth  were  first  tapped  and  in  accordance 
with  the  general  spirit  of  extravagance  which  has  prevailed 
in  matters  relating  to  natural  resources  in  the  United  States, 
immense  amounts  of  natural  gas  were  wasted  in  the  early 
years  of  its  use. 

“  Natural  gas  is  used  principally  as  a  source  of  light  and 
heat  in  domestic  service,”  says  Mr.  F.  H.  Oliphant.1  “  It  is 
employed  extensively  in  industrial  establishments  for  many 
purposes,  notably  in  the  manufacture  of  glass,  in  the  genera¬ 
tion  of  steam,  puddling  of  iron,  in  roasting  ores,  in  heating, 
furnaces,  and  in  the  manufacture  of  steel,  and  it  is  also 
utilized  as  a  source  of  power  in  the  gas  engine,  in  drilling 
and  operating  oil  and  gas  wells,  and  in  pumping  oil.  The 
heat  value  stored  in  natural  gas  is  greater  than  that  caused 
by  any  artificial  combination  of  carbon  and  hydrogen,  and 
is  a  perfect  fuel  as  it  issues  from  its  original  rock-sealed 
reservoirs.  No  preparation  is  necessary  for  its  combustion 
and  no  residue  is  left.  It  is  not  affected  by  ordinary  tem¬ 
perature  and  it  is  easily  distributed  by  pipes  to  points  of 
consumption.  It  is  a  most  economical  source  of  light  and 
power,  and  an  ideal  household  fuel.” 

Natural  gas  consumed  with  an  ordinary  tip  at  the  rate 
of  seven  or  eight  cubic  feet  per  hour  gives  light  of  about 
six  or  seven  candle-power.  In  an  Argand  burner  with  a 
chimney  consuming  five  or  six  cubic  feet  it  gives  about 
twelve  candle-power.  When  incandescent  mantles  are  used, 
“  the  result  is  the  cheapest  and  best  illuminant  known.”  Mr. 
Oliphant  states  that  the  introduction  of  natural  gas  into  the 
household  has  been  accomplished  without  personal  incon¬ 
venience  or  loss  of  life  except  in  rare  cases.  He  says  that  the 
risk  of  fire  is  less  than  when  wood  or  coal  is  used.  Asphyxia¬ 
tion  has  resulted,  however,  in  some  cases  from  the  use  of  a  gas 
stove  in  the  room  without  a  flue  connection,  inasmuch  as 
under  these  conditions  the  combustion  is  imperfect,  and  the 
air  is  likely  to  become  saturated  with  carbonic  acid  gas.  Out 
of  a  total  of  651  natural  gas  companies  in  the  year  1902, 
430  reporting  to  the  Census  Bureau  had  a  capital  stock  of 
$92,190,000  and  a  bonded  debt  of  $19,444,000.  The  value 
of  the  gas  produced  in  that  year  from  the  14,556  wells  in 

1  Special  Reports  of  the  Census  Office,  “  Mines  and  Quarries,  1902,”  op.  cit.  p.  774. 


ARTIFICIAL  AND  NATURAL  GAS. 


539 


operation  was  $30,868,000,  and  the  total  length  of  natural 
gas  pipe  laid  up  to  December  31,  1902,  was  approximately 
25,000  miles  There  were  510,000  domestic  consumers  sup¬ 
plied  with  natural  gas.  This  number  more  than  doubled 
in  the  next  five  years,  for  in  the  Geological  Survey  Report 
for  1907,  the  number  of  domestic  consumers  is  given  as 
1,055,181,  and  the  number  of  industrial  consumers  as  13,00s.1 
In  the  latter  year,  the  amount  of  natural  gas  produced  was 
estimated  at  404  billions  of  cubic  feet,  or  nearly  three  times 
the  total  amount  of  artificial  gas  made.  The  average  price 
of  natural  gas  was  13.07  cents  per  1000  feet,  making  the 
total  value  of  the  product  for  the  year  1907  approximately 
$53,000,000.  Of  the  total  amount  of  gas  consumed,  about 
130  billions  of  cubic  feet  was  used  for  domestic  purposes  at 
an  average  price  of  23  cents  per  1000,  while  the  remaining 
273  billions  used  for  industrial  purposes  sold  at  an  average 
price  of  only  8.3  cents.  The  number  of  wells  in  operation 
had  increased  from  14,556  in  1902  to  18,674  five  years  later. 

The  natural  gas  companies  owned  in  1907  about  700 
square  miles  of  land  and  held  under  lease  nearly  10,000 
square  miles  more.  In  some  cases  the  original  pressure  at 
the  gas  wells  was  as  high  as  1500  pounds  to  the  square  inch. 
In  most  cases,  however,  the  pressure  has  gradually  dimin¬ 
ished  with  the  escape  or  use  of  gas,  so  that  some  fields  have 
had  to  be  abandoned  altogether  while  in  others  special  ma¬ 
chinery  has  been  installed  to  pump  the  gas  and  force  it 
through  the  pipes  at  sufficient  pressure  for  a  distant  supply. 
In  some  instances  natural  gas  is  carried  through  pipe  lines 
not  less  than  250  miles  to  the  point  of  consumption.  Pipe 
lines  are  now  being  laid  from  the  West  Virginia  fields  to 
Cincinnati  and  it  is  proposed  to  lay  other  lines  from  the 
same  state  to  Baltimore.  It  is  also  proposed  that  lines  be  laid 
from  the  Oklahoma  fields  to  St.  Louis,  a  distance  of  about 
350  miles.  Although  the  pressure  at  the  field  end  of  the 
pipe  lines  is  very  great,  gas  is  generally  distributed  to  pri¬ 
vate  consumers  in  cities  at  a  pressure  of  from,  three  and  one- 
half  to  seven  ounces  to  the  square  inch.  Regulators  are 
placed  between  the  high  pressure  pipe  lines  and  the  low  pres¬ 
sure  distributing  mains  in  a  way  that  is  analogous  to  the  use 
of  transformers  on  high  tension  electric  wires. 

1  Op.  cit.,  p.  328. 


540 


MUNICIPAL  FRANCHISES. 


There  are  great  fluctuations  in  the  supply  and  value  of 
natural  gas  in  the  principal  fields  of  production.  The  in¬ 
crease  and  decrease  in  the  value  of  this  product  in  the  five 
leading  gas  producing  states  for  five  different  years  from 
1882  to  1907  are  shown  in  the  following  table,  compiled  from 
the  Geological  Survey  Report  of  Mineral  Resources  of  the 
United  States  for  1907  :x 


1882. 

1888. 

1896. 

1902. 

1907. 

Pennsylvania . 

Ohio . 

West  Virginia . 

Indiana . 

Kansas . 

$75,000 

$19,282,375 

1,500,000 

120,000 

1,320,000 

$5,528,610 

1,172,400 

640,000 

5,043,635 

124,750 

493,117 

$14,352,183 

2,355,458 

5,390,181 

7,081,344 

824.431 

864,266 

$18,844,156 

8,718,562 

16,679,962 

1,572,605 

4,843,019 

2,217,531 

All  other  States . 

Total . 

140,000 

407,500 

$215,000 

$22,629,875 

$13,002,512 

$30,867,863 

$52,866,835 

No  state  other  than  the  five  for  which  statistics  have  just 
been  given  had  ever  reached  the  million  dollar  mark  in  the 
production  of  natural  gas  in  any  one  year  up  to  1907.  In 
that  year  the  value  of  the  natural  gas  production  of  New 
York  was  $766,157;  of  Oklahoma  $417,221;  of  Kentucky 
$380,176.  Twenty-one  states  in  all  are  mentioned  as  pro¬ 
ducing  some  natural  gas. 

249.  Artificial  and  natural  gas  franchises  compared. — A 

franchise  for  the  supply  of  natural  gas  to  a  city,  while  con¬ 
taining  all  the  safeguards  required  in  an  artificial  gas  fran¬ 
chise,  should  also  contain  certain  special  provisions.  The 
supply  of  natural  gas  is  derived  practically  always,  at  least 
in  the  case  of  the  more  important  cities,  from  distant  fields, 
and  frequently  from  other  states.  Under  these  circum¬ 
stances,  it  is  probable  that  the  company  distributing  the  gas 
will  not  be  the  same  corporation  as  the  one  building  the  pipe 
line  or  the  one  developing  the  field.  At  any  rate,  the  neces¬ 
sity  of  passing  through  many  jurisdictions  and  the  possi¬ 
bility  of  having  the  supply  exhausted  through  the  service  of 
other  communities,  complicate  the  situation.  The  franchise 
once  having  been  granted  and  the  supply  of  manufactured 
gas  having  ceased,  the  city  is  pretty  well  at  the  mercy  of  out¬ 
side  interests  unless  the  franchise  is  most  carefully  guarded 

1  Pages  334,  325. 


ARTIFICIAL  AND  NATURAL  GAS. 


541 


by  the  imposition  of  penalties  for  failure  to  furnish  a  con¬ 
stant  supply  at  uniform  pressure  at  the  price  fixed.  The 
question  of  pressure  is  especially  important  because  natural 
gas  is  generally  used  not  only  for  lighting  and  cooking;  but 
also  for  heating  residences,  and  on  this  account,  when  the 
weather  turns  suddenly  cold,  there  is  a  tremendous  increase 
in  the  demand  for  gas.  Moreover,  as  natural  gas  is  ordinarily 
fed  into  the  distributing  system  direct  from  the  pipe  lines, 
not  being  stored  up  in  holders  to  meet  a  heavy  demand,  it  is 
absolutely  essential  that  the  pipe  lines  should  be  of  sufficient 
capacity  to  prevent  a  gas  famine  just  at  a  time  when  gas  is 
most  needed.  It  is  said  that  the  uncertainty  during  the 
winter  months  of  supply  in  some  localities  is  so  great  that 
manufacturing  concerns  do  not  depend  upon  gas  for  fuel 
except  during  the  summer  months.  On  account  of  the  likeli¬ 
hood  in  any  particular  case  that,  irrespective  of  the  capacity 
of  the  pipe  lines,  the  supply  will  in  time  become,  deficient  or 
give  out  entirely,  it  is  of  great  importance  that  every  natural 
gas  franchise  should  make  provision  for  the  furnishing  of 
manufactured  gas  in  case  of  necessity.  Adequate  provision 
should  also  be  made  for  proper  notice  to  the  people  and 
supervision  by  the  company  of  the  installation  of  fixtures 
adapted  to  the  use  of  natural  gas. 

A  special  committee  of  the  Cleveland  Chamber  of  Com¬ 
merce,  after  an  investigation  made  in  connection  with  an  ap¬ 
plication  for  a  natural  gas  franchise  in  that  city,  recom¬ 
mended  in  its  report  of  March  19,  1907,  the  insertion  of 
certain  important  provisions  in  the  pending  ordinances.1 
It  recommended  that  the  applicant  companies  should  bring 
their  supply  from  the  West  Virginia  fields  only,  and  that 
their  pipe  lines  should  not  be  tapped  to  serve  any  other  large 
city.  The  gas  furnished  should  not  be  of  less  than  900  or 
1000  heat,  units  and  should  be  delivered  “  as  it  comes  from 
the  earth,  without  mixture  with  air  or  other  adulteration.” 
The  committee  further  recommended  that  the  companies 
should  be  required  to  maintain  their  existing  gas  works  in 
a  state  of  readiness  to  manufacture  gas  at  any  time  upon 
the  failure  of  the  supply  of  natural  gas.  They  were  to  be 
required  to  maintain  a  constant  supply  at  a  uniform  pres- 

1  “  Report  of  the  Special  Committee  on  Natural  Gas  Ordinances,”  adopted  by 
the  Cleveland  Chamber  of  Commerce,  Mar.  19, 1907. 


542 


MUNICIPAL  FRANCHISES. 


sure  and  particularly  to  maintain  in  constant  use  the  holders 
then  being  used  for  artificial  gas  for  the  purpose  of  equaliz¬ 
ing  pressure.  It  was  also  recommended  that  the  companies 
should  be  required  to  furnish  meters  and  meter  connections 
without  cost  to  the  consumers  and  to  install  without  charge 
a  safety-valve  at  some  point  in  the  supply  pipe  on  the  prem¬ 
ises  of  each  consumer.  This  valve  would  be  for  the  purpose 
of  shutting  off  the  supply  whenever  the  pressure  should  fall 
below  the  point  at  which  the  gas  would  burn  in  any  burner. 
The  companies  were  also  to  be  required  to  place  at  their  own 
expense  a  pressure  regulator  near  each  meter.  It  was  also 
recommended  that  if  the  companies  should  sell  gas  for  other 
than  domestic  purposes  at  a  price  other  than  the  one  to  be 
fixed  in  the  ordinance,  they  should  be  required  to  charge  the 
same  rates  to  all  consumers  using  gas  for  similar  purposes 
“  without  regard  to  the  quantity  consumed ;  a  possible  excep¬ 
tion  only  being  a  special  rate  to  the  City  of  Cleveland.” 

While  the  proposition  for  granting  a  new  natural  gas  fran¬ 
chise  failed  to  pass  the  city  council  in  Cleveland  on  account 
of  irreconcilable  differences  in  regard  to  rates,  these  recom¬ 
mendations  of  the  Chamber  of  Commerce  committee  are  of 
importance  in  connection  with  natural  gas  franchises 
generally. 


CHAPTER  XX. 


GAS  FRANCHISES  WHERE  ONLY  ARTIFICIAL  GAS  IS 

AVAILABLE. 

250.  History  of  gas  franchises  in  New  256.  Company’s  plant  appraised  in  anti- 

York  City.  cipation  of  purchase.— Des  Moines. 

251.  The  sliding  scale.— Boston.  257.  Price  of  gas  to  be  regulated  at  in- 

252.  Gas  franchises  in  other  Massachu-  tervals.— Saginaw. 

setts  cities.— Worcester.  Spring-  258.  Percentage  payment  of  receipts 
field,  Somerville.  from  all  sources,  including  by- 

253.  The  lease  of  a  great  municipal  products.— Nashville. 

plant.— Philadelphia.  259.  Gas  charter  awarded  after  public 

254.  City  may  buy  back  exclusive  fran-  advertisement.— Springfield,  Ill. 

chise  at  end  of  forty  years.—  260.  Exclusive  grant  for  twenty  years 
Minneapolis  to  highest  and  best  bidder.— New- 

255.  Rates  to  be  fixed  by  courts  if  coun-  port,  Ky. 

cil  rates  are  unreasonable.— St.  261.  Extensions  at  the  discretion  of  the 
Paul.  common  council. — Syracuse. 

250.  History  of  gas  franchises  in  New  York  City.— 

There  are  at  the  present  time  twenty-one  operating  gas  com¬ 
panies  in  New  Y"ork  City,  which  in  the  year  1907  supplied 
approximately  997,752  consumers.1  Most  of  these  com¬ 
panies,  however,  are  controlled  either  by  the  Consolidated 
Gas  Company  of  New  York  or  by  the  Brooklyn  Union  Gas 
Company,  and  these  two  companies  are  themselves  closely 
affiliated.  In  fact,  there  were  only  about  30,000  consumers 
being  supplied  by  companies  even  nominally  independent  of 
these  two  great  systems.  The  total  amount  of  gas  manu¬ 
factured  by  all  these  companies  during  the  year  ending  June 
30,  1907,  was  34,057,000,000  cubic  feet.  Of  this  amount, 
between  5  and  6  per  cent  was  unaccounted  for,  being  lost 
through  leakage,  condensation  or  in  some  other  manner. 
The  gross  receipts  of  the  various  companies,  not  counting 
the  extra  twenty  cents  per  thousand  cubic  feet  which  the 
Consolidated  Gas  Company  collected  from  the  consumers  and 
deposited  with  the  United  States  court  pending  the  final 
decision  of  the  eighty-cent  gas  litigation,  amounted  to  about 

1  See  Annual  Report  of  Public  Service  Commission  for  the  First  District,  New 
York  for  year  1907,  vol.  2,  p.  458. 

543 


544 


MUNICIPAL  FRANCHISES. 


$27,247,000  of  which  $967,000  was  received  from  the  city 
for  public  lighting,  and  about  $557,000  was  received  from 
the  rent  of  gas  stoves,  engines,  lamps,  etc.  The  gross  amount 
received  on  prepayment  meters  was  $2,373,000. 

The  franchises  exercised  by  the  various  gas  companies  of 
New  York  City  were  originally  granted  by  three  cities,  nine 
villages  and  twelve  towns.  This  does  not  include  the  fran¬ 
chises  of  the  borough  of  Eichmond  which  appear  to  have 
been  established  in  large  part  by  acquiescence  in  the  first 
four  wards  of  that  borough  formerly  occupied  by  four  towns 
and  three  villages.  The  first  gas  franchise  in  old  New  York 
was  granted  in  the  form  of  a  contract  dated  May  12,  1823, 
to  the  New  lrork  Gas  Light  Company  which  had  been  incor¬ 
porated  during  the  same  year  by  special  act  of  the  legisla¬ 
ture.1  Under  its  legislative  charter  the  company  was  au¬ 
thorized  to  “  manufacture,  make  and  sell  gas,  to  be  made  of 
coal,  oil,  tar,  peat,  pitch  or  turpentine  or  other  materials,” 
and  to  be  used  for  lighting  the  City  of  New  Yrork  and  its 
streets,  “  and  any  buildings,  manufactories  or  houses  therein 
contained  and  situate.”  It  was  provided,  however,  “  that 
no  public  street,  lane  or  highway  in  the  City  of  New  York 
shall  be  dug  into  or  in  anywise  injured  or  defaced  without 
the  permission  ”  of  the  city  having  first  been  obtained.  In 
accordance  with  this  authority,  the  common  council  granted 
the  company  “  the  sole  and  exclusive  privilege  and  right  of 
laying  or  placing  underground  pipes  in  all  and  every  of  the 
public  streets  and  parts  of  streets  ”  south  of  the  line  run¬ 
ning  from  the  foot  of  Grand  Street  at  the  East  Eiver  to  the 
foot  of  Canal  Street  at  the  Hudson  Eiver,  “  for  conducting 
gas  for  lighting  the  public  lamps  ”  and  the  houses  and  build¬ 
ings  adjacent  to  the  streets  south  of  this  line.2  The  com¬ 
pany  wras  “  to  have  and  to  hold  and  to  enjoy  ”  these  privi¬ 
leges  “  for  and  during  and  until  the  twelfth  day  of  May, 
which  will  be  in  the  year  of  our  Lord  one  thousand  eight 
hundred  and  fifty-three.”  The  company  agreed  that  within 
two  years  it  would  establish  and  complete  “  good  and  suffi¬ 
cient  buildings,  works  and  apparatus  for  the  preparing  and 
manufacture  of  gas,”  and  that  it  would  cause  pipes  of  suffi¬ 
cient  capacity  to  be  laid  and  would  manufacture  and  sup- 

1  Laws  of  New  York,  1823,  Chapter  85. 

*  Contract  dated,  May  12,  1823. 


ARTIFICIAL  GAS  FRANCHISES. 


545 


ply,  “  in  the  most  approved  manner,  sufficient  quantities  of 
the  best  quality  gas,  commonly  called  inflammable  gas,  for 
lighting  the  houses  and  public  lamps  in  the  street  called 
Broadway  in  the  said  city  from  the  Battery  to  Grand 
Street.”  The  company  also  agreed  that  after  the  expiration 
of  five  years  it  would  supply  gas  for  lighting  all  the  streets 
and  houses  within  the  district  covered  by  its  franchise  when¬ 
ever  the  city  should  “  by  resolution  or  by-law  reasonably  re¬ 
quire  99  such  supply.  The  company’s  pipes  were  to  be  con¬ 
structed  “  in  the  most  approved  manner  of  cast  iron,  and 
of  the  best  materials.”  The  company  agreed  also  to  light 
the  public  lamps  in  the  streets  where  it  had  pipes  at  a  yearly 
expense  to  the  city  “  not  exceeding  what  would  be  the  ex¬ 
pense  of  lighting  and  supplying  an  equal  number  of  the  said 
lamps  with  oil  of  the  quality  generally  used  for  that  pur¬ 
pose,  estimating  the  price  of  oil  at  the  average  price  of  the 
same  in  the  city  of  New  York  during  the  preceding  year.” 
The  company  was  also  to  furnish  at  its  own  expense  “the 
necessary  conductors  of  metal  of  sufficient  capacity  to  the 
lamp  posts.”  It  agreed  that  the  lighting  should  be  “  of  a 
quality,  brilliancy  or  intensity  equal  to  the  gas  in  use  for 
the  public  lamps  in  the  City  of  London,”  but  “the  expense 
of  lamps,  lamp  irons,  lamp  posts  and  fittings  up  ”  was  to  be 
paid  by  the  city.  It  was  expressly  provided,  however,  that 
the  city  should  be  “  at  no  other  expense  for  fixtures,  con¬ 
ductors,  repairs,  or  on  any  other  account  whatsoever.”  Forty- 
eight  hours’  notice  was  to  be  given  by  the  company  to  the 
street  commissioner  prior  to  the  opening  of  any  street  for 
laying  or  repairing  gas  pipes,  and  the  company  was  required 
to  “  replace  the  earth  which  they  may  remove  in  so  doing, 
before  sunset  of  the  day  on  which  any  such  opening  shall  be 
made,”  and  to  “replace  the  pavements  and  repave  and  repair 
the  same  in  such  reasonable  time  and  manner  ”  as  the  city 
should  direct  and  “  in  as  good  and  firm  a  manner  as  the 
streets  were  in  before  being  broken  up  for  the  aforesaid  pur¬ 
poses.”  All  street  repairs  made  necessary  by  the  company’s 
pipes  were  to  be  made  by  the  company  at  its  own  expense. 
It  was  also  stipulated  that  the  company  should  so  conduct  its 
manufactory  or  manufactories  of  gas  as  not  to  create  a  nui¬ 
sance,  and  that  it  should  be  governed  by  such  reasonable  and 
necessary  rules  and  regulations  relating  to  the  opening  of 


546 


MUNICIPAL  FRANCHISES. 


streets  and  the  laying  of  pipes  as  the  city  might  from  time 
to  time  ordain.  It  was  expressly  stipulated  that  the  fran¬ 
chise  should  not  be  so  construed  as  to  prevent  any  person 
from  erecting  on  his  own  premises  any  building  or  appur¬ 
tenance  for  the  purpose  of  lighting  his  own  house  or  manu¬ 
factory  with  gas.  It  was  also  provided  that  if  the  company 
did  not  fulfill  all  the  convenants  and  conditions  of  the  con¬ 
tract,  the  common  council  might  by  resolution  or  ordinance 
“  annul  and  vacate  this  grant/7 

On  May  8,  1833,  a  franchise  was  granted  to  the  Man¬ 
hattan  Gas  Light  Company  which  had  been  incorporated 
February  26,  1830,  by  a  special  act  of  the  legislature.1  Like 
the  preceding  company,  this  one  had  no  authorization  to  dig 
into  the  city’s  streets  without  the  consent  of  the  municipal 
authorities.  The  city’s  grant  to  this  company  was  for  that 
portion  of  Manhattan  Island  lying  north  of  the  exclusive 
territory  of  the  New  York  Gas  Light  Company.  This  fran¬ 
chise  was  not  exclusive  and  was  made  to  expire  on  May  12, 
1853,  the  same  date  on  which  the  exclusive  grant  of  the 
original  gas  company  for  the  southern  portion  of  the  Island 
would  expire.  The  company  agreed  that  any  gas  house  or 
works  erected  by  it  should  be  established  on  the  margin  of 
either  the  Hudson  or  the  East  River,  and  should  not  be  south 
of  Fourteenth  street.  The  company  was  required  to  supply 
public  lamps  adjacent  to  its  mains  and  light  them  in  ac¬ 
cordance  with  regulations  prescribed  by  the  city.  The  yearly 
charge  to  the  city  for  lighting  and  supplying  lamps  south 
of  Sixth  street  was  not  to  exceed  $15  each.  This  franchise 
contained  substantially  the  same  provisions  as  the  preceding 
one  relating  to  the  quality  of  gas,  the  supply  of  fixtures  and 
the  digging  up  of  the  streets.  There  wa3  an  additional 
clause,  however,  to  the  effect  that  no  street  was  to  be  opened 
or  the  pavement  removed  and  no  excavations  to  be  filled  up 
or  the  pavement  replaced  “  except  under  the  direction  and 
supervision  of  a  competent  person”  appointed  by  the  street 
commissioner.  This  person  was  to  be  considered  an  em¬ 
ployee  of  the  city,  but  was  to  be  paid  by  the  company  at  a 
rate  to  be  fixed  by  the  street  commissioner,  but  not  to  exceed 
$1.50  per  day  during  actual  employment.  There  was  also 
a  clause  providing  that  the  streets  should  not  be  disturbed 

1  Laws  of  New  York,  1830,  Chapter  59. 


ARTIFICIAL  GAS  FRANCHISES. 


547 


between  December  1  and  March  1  of  any  winter  with¬ 
out  the  consent  of  the  street  commissioner.  It  is  to  be  noted 
that  after  ten  years5  experience  the  city  had  made  some 
progress  in  franchise  regulation.  This  second  franchise  was 
in  contrast  with  the  first  in  three  important  respects.  It 
was  expressly  non-exclusive.  It  made  provision  for  the  direct 
supervision  of  the  company’s  street  work  by  a  city  inspector. 
It  provided  that  the  streets  should  not  be  torn  up  in  the 
winter  without  special  permission. 

On  May  5,  1848,  five  years  before  the  expiration  of  the 
original  grant  to  the  Manhattan  Gas  Light  Company,  the  city 
gave  this  company  a  new  franchise  to  run  for  a  period  of 
twenty  years  covering  that  portion  of  its  former  franchise 
territory  lying  south  of  Forty-second  street.  In  this  grant 
a  provision  was  made  for  extensions.  The  city  reserved  the 
right  to  order  the  company’s  mains  to  be  extended  in  and 
along  all  the  streets  and  avenues  within  the  territorial  limits 
of  the  grant  “  commencing  at  Grand  and  Canal  streets  and 
continuing  through  each  street  in  regular  succession,”  but 
the  company  was  not  to  be  compelled  to  expend  more  than 
$6,000  a  year  in  such  extensions.  The  rate  for  public  light¬ 
ing  was  to  remain  at  $15  a  year  for  each  lamp.  There  was 
an  additional  clause  put  in,  to  the  effect  that  the  city  might 
require  the  public  lamps  to  be  kept  burning  at  other  times 
than  as  had  been  customary,  but  it  was  provided  that  if,  as 
a  result  of  the  city’s  order,  the  whole  number  of  hours  dur¬ 
ing  which  all  or  any  portion  of  the  lamps  were  kept  burning 
should  exceed  the  average  number  of  hours  which  public 
lamps  had  been  kept  burning  during  the  five  years  preceding 
the  date  of  this  grant,  then  the  company  was  to  receive  an 
additional  compensation  “  equivalent  to  a  pro-rata  increase  of 
the  compensation  hereinbefore  allowed,  proportioned  to  the 
increased  number  of  hours  beyond  the  said  average  number.” 
For  the  purposes  of  this  contract,  this  average  was  estimated 
and  fixed  at  2300  hours  per  annum.  It  was  expressly  stipu¬ 
lated  that  the  burners  in  the  public  lamps  should  be  equal  to 
those  already  in  use  in  the  city  and  have  an  average  consump¬ 
tion  of  three  cubic  feet  per  hour.  The  company  agreed  to 
furnish  the  necessary  metal  conductors  to  the  lamp  posts  at 
its  own  expense  and  to  fit  up  public  lamps  at  a  cost  to  the 
city  of  $5  each,  but  the  city  was  required  in  addition  to  pay 


548 


MUNICIPAL  FRANCHISES. 


the  cost  “  of  the  posts,  lanterns  and  repairs.”  The  provision 
relating  to  inspection  of  street  work  was  changed  in  this 
franchise  so  as  to  relieve  the  company  of  the  expense  of  pay¬ 
ing  for  it.  The  city  furthermore  agreed  that  it  would  pass 
all  ordinances  necessary  to  protect  the  company’s  interests 
“  which  of  right  ought  to  be  passed  for  that  purpose.”  In 
the  search  for  franchises  that  might  not  have  expired,  the 
Consolidated  Gas  Company’s  attorney  turned  up  a  new  one 
in  1909,  upon  which  the  company  hangs  a  claim  for  per¬ 
petual  rights  in  that  portion  of  old  New  York  north  of 
Forty-second  street.  This  recently-discovered  franchise  was 
approved  by  the  Mayor,  April  8,  1853,  just  a  few  weeks  prior 
to  the  expiration  of  the  Manhattan  Gas  Company’s  original 
grant.  It  is  in  terms  as  follows : 

“  Resolved,  that  the  Manhattan  Gas  Light  Co.,  be  and  are 
hereby  authorised,  and  permitted  to  lay  their  Street  Mains 
beyond  the  line  of  Forty-second  street,  northward.” 

The  New  York  Gas  Light  Company’s  franchise  was  not 
renewed  in  1853;  neither  was  the  company  ousted  from  the 
streets.  On  April  25,  1855,  a  franchise  was  granted  to  a 
third  company  known  as  the  Harlem  Gas  Light  Company. 
This  grant  was  for  the  portion  of  old  New  York  north  of 
Seventy-ninth  street.  It  was  not  limited  as  to  time,  was  not 
exclusive  and  reserved  to  the  city  the  right  “to  purchase  at 
any  time  from  the  said  company,  all  the  material,  pipes,  fix¬ 
tures,  buildings,  and  all  and  singular  all  the  personal  and 
real  property  owned  by  said  company,  by  paying  to  the  said 
company  the  cost  of  the  same,  and  ten  per  cent  over  and 
above  said  cost.”  Furthermore,  the  city  reserved  the  right 
to  revoke  the  grant  on  satisfactory  proof  of  the  company’s 
failure  to  comply  with  its  conditions.  The  company  was 
granted  exemption  from  taxation  on  its  personal  property 
for  a  period  of  three  years,  but  was  required  to  “  proceed 
immediately  or  within  one  year  from  the  approval  ”  of  the 
franchise  to  lay  its  mains  in  the  district  covered  by  the  grant, 
and  within  three  years  to  supply  gas  to  the  corporate  au¬ 
thorities  and  to  private  consumers.  The  company  was  not 
to  impede  or  interrupt  public  travel  in  laying  its  mains 
“more  than  cannot  possibly  be  avoided.”  It  was  to  restore 
the  streets  to  as  good  condition  as  they  were  in  before  being 


ARTIFICIAL  GAS  FRANCHISES. 


549 


opened  and  was  to  be  at  all  times  subject  to  restric¬ 
tions,  ordinances  or  resolutions  adopted  by  the  common  coun¬ 
cil,  and  to  be  under  the  control  of  the  street  department. 
It  was  stipulated  that  the  company  “  shall  furnish  a  supply 
of  gas  to  all  persons  who  may  desire  the  same,  and  shall  de¬ 
prive  no  consumers  of  gas,  upon  their  refusal  to  pay  or  for 
a  dispute  of  the  bill  rendered  until  they  have  served  such 
disputants  with  the  affidavit  of  their  inspector  as  to  the  cor¬ 
rectness  of  the  register  of  their  meter,  and  that  all  the  gas 
for  which  said  disputants  are  charged  has  actually  passed 
through  said  meter.” 

During  the  same  year,  1855,  a  fourth  gas  company,  the 
Metropolitan  Gas  Light  Company  of  the  City  of  New  York, 
received  a  charter  from  the  legislature  authorizing  it  to 
manufacture  and  supply  gas  in  the  City  of  New  York  and  to 
lay  pipes  and  adopt  any  other  necessary  means  “  to  furnish 
gas  to  any  inhabitant  of  said  city.”  1  Under  this  charter 
the  company  was  required  to  secure  the  permission  of  the 
two  boards  of  the  common  council  before  commencing  opera¬ 
tions.  The  boards  were  authorized,  however,  “to  grant  and 
vest  exclusive  permission  and  authority  to  and  in  said  com¬ 
pany  for  said  purposes  to  such  extent  and  under  such  regula¬ 
tions  as  to  them  shall  seem  expedient,  and  such  permission 
and  authority  shall  be  conclusive  and  shall  continue  as  thus 
fixed  during  the  period  designated  by  said  boards  at  the  time 
of  granting  the  same.”  It  was  stipulated,  however,  that  the 
rights  and  privileges  granted  by  this  charter  should  not  be 
construed  “  to  affect  or  impair  any  exclusive  rights  or 
privileges  vested  in  any  incorporated  company  in  said  city.” 
On  December  22,  1858,  the  common  council  passed  a  resolu¬ 
tion  over  the  mayor’s  veto  authorizing  this  company  “  to  lay 
pipes  for  conducting  gas  through  the  streets,  avenues,  lanes, 
alleys  and  squares  ”  of  the  city  “  for  the  period  of  thirty 
years,  to  be  subject  to  the  same  restrictions  as  to  the  mode  of 
laying  down  said  conductors  as  apply  to  and  govern  the  New 
York  and  Manhattan  Gas  Light  Companies  in  that  respect.” 

On  September  17,  1863,  another  gas  franchise  was  passed 
by  the  common  council  over  the  mayor’s  veto,  granting  to 
the  Anthracite  Gas  Lighting  and  Heating  Company  of  New 
York  the  right  to  lay  its  pipes  “for  conducting  gas  for  il- 

1  Laws  of  New  York,  1855,  Chapter  545. 


550 


MUNICIPAL  FRANCHISES. 


luminating  and  heating,  and  other  purposes  ”  through  the 
streets,  alleys  and  public  places  of  the  city  for  a  period  of 
fifty  years.  Street  work  was  to  be  done  under  the  super¬ 
vision  of  the  street  commissioner  and  the  streets  were  to  be 
restored  by  the  company.  The  resolution  granting  this  fran¬ 
chise  was  amended  two  years  later  by  adding  after  the  name 
of  the  company  the  words,  “  and  their  assigns.” 

On  April  30,  1868,  a  franchise  in  almost  the  same  terms  as 
the  Metropolitan  grant  of  1853,  was  granted  for  a  period  of 
thirty  years  to  the  New  York  Mutual  Gas  Light  Company. 
This  company  had  been  incorporated  by  a  special  act  of  the 
legislature  in  1866.1  Under  its  legislative  charter  the  com¬ 
pany  was  not  permitted  to  open  the  streets  of  the  city  with¬ 
out  first  obtaining  the  permission  of  the  municipal  authori¬ 
ties,  unless  in  place  of  such  permission  “  the  majority  of  the 
owners  in  the  interest  of  the  property  immediately  adjoin¬ 
ing  the  part  of  the  street  or  highway  so  dug  into,  injured  or 
defaced,  shall  give  their  consent  thereto  in  writing.”  This 
charter  also  provided  that  whenever  the  company’s  profits, 
after  deducting  the  operating  expenses,  should  exceed  in  any 
one  year  ten  per  cent  “  upon  the  whole  capital  stock,”  the 
excess  over  such  amount  should  be  divided  half  and  half  be¬ 
tween  the  company’s  consumers  pro  rata  according  to  con¬ 
sumption,  and  the  company’s  stockholders  pro  rata  according 
to  the  amount  of  stock  held,  with  this  limitation,  namely, 
that  no  stockholder  should  be  entitled  to  this  dividend  upon 
more  than  fifty  shares  of  stock.  It  was  also  stipulated  that 
if  the  directors  of  the  company  should  consolidate  with  or 
transfer  the  franchise  granted  by  the  state  to  any  of  the 
organized  gas  companies  of  the  City  of  New  York,  the 
director  or  directors  voting  for  such  consolidation  or  trans¬ 
fer  should  be  deemed  guilty  of  a  misdemeanor,  and  upon 
conviction  be  punished  by  imprisonment  in  the  penitentiary 
for  a  period  of  not  less  than  six  months  or  more  than  a 
year.  This  clause  prevented  this  company  from  going  into 
the  combination  of  companies  which  formed  the  Consoli¬ 
dated  Gas  Company  in  1884.  It  did  not  prevent,  however, 
the  acquirement  of  the  Mutual  company’s  stock  at  a  later 
date  by  the  Consolidated  Gas  Company. 

On  June  12,  1871,  by  a  special  act  of  the  state  legislature, 

1  Laws  of  New  York,  1866,  Chapter  651. 


ARTIFICIAL  GAS  FRANCHISES. 


551 


certain  individuals  were  given  a  franchise  to  manufacture 
and  sell  gas  for  the  purpose  of  lighting  all  that  portion  of 
the  City  of  JSTew  York  lying  north  of  Seventy-ninth  street, 
and  also  including  the  whole  of  Central  Park  “  in  its  en¬ 
tire  width  and  length.”  1  The  grantees  were  authorized  to 
lay  pipes  in  the  streets,  alleys,  parks  and  public  places  of 
that  portion  of  the  city  and  to  adopt  any  other  necessary 
means  to  furnish  gas  to  any  inhabitants  in  the  district.  The 
grantees  were  required  to  conduct  their  business  in  such  a 
way  as  not  to  create  a  nuisance  and  were  to  see  that  all  street 
work  in  connection  with  their  enterprise  wTas  done  “  in  a 
proper  and  workmanlike  manner,  with  as  little  delay  and 
inconvenience  to  public  travel  as  practicable,  and  without 
injury  to  the  Croton  pipes.”  It  was  stipulated,  however,  that 
this  grant  should  not  be  construed  as  authorizing  the  laying 
of  any  gas  pipes  or  conduits  in  Central  Park  or  in  any  other 
public  place  under  the  control  of  the  Department  of  Parks 
without  its  consent.  It  was  expressly  stated  that  “  the  rights 
and  privileges  hereby  granted  are  exclusive;  but  shall  not 
be  construed  to  affect  or  impair  any  exclusive  rights  or 
privileges,  if  any,  vested  in  any  incorporated  company  in  said 
city.”  It  was  provided  that  any  person  wilfully  injuring 
the  gas  works  or  fixtures  of  the  grantees  should  forfeit  to 
them  “  treble  the  amount  of  the  damage  sustained  by  means 
of  such  offense  or  injury.”  It  was  also  expressly  provided 
that  “  this  act  shall  be  deemed  a  public  act,  and  shall  be 
favorably  construed  for  the  purposes  herein  expressed  and 
declared,  in  all  courts  and  places  whatsoever.”  This  fran¬ 
chise  has  been  many  times  transferred  by  individual  assign¬ 
ments  and  is  now  owned  by  certain  individuals  connected  with 
the  Consolidated  Gas  Company.  The  right  to  use  it  was 
granted  by  its  owners  by  contract  on  February  25,  1874,  to 
the  Union  Gas  Light  Company  and  again  on  December  11, 
1876,  to  the  Knickerbocker  Gas  Light  Company  which  later 
went  into  the  Consolidated  Gas  Company. 

The  city’s  desire  for  competition  in  the  gas  business  was 
not  yet  satisfied.  In  1876  a  blanket  resolution  was  adopted 
by  the  board  of  aldermen  in  the  following  terms : 2 

“  Resolved  :  that  permission  be  and  is  hereby  given  to  all  incor- 

1  Laws  of  New  York,  1871,  Chapter  944. 

*  Resolution  approved  by  the  Mayor,  Dec.  23,  1876. 


552 


MUNICIPAL  FRANCHISES. 


porated  gas  light  companies  to  lay  gas  mains  and  pipes  in  the  streets, 
avenues  and  public  places  in  this  city  for  the  purpose  of  supplying  gas 
to  this  city  and  its  inhabitants  upon  such  conditions  as  may  be  pre¬ 
scribed  and  approved  by  his  honor  the  Mayor,  the  Comptroller  and  the 
Commissioner  of  Public  Works  who  are  now  by  law  authorized  to 
make  provisions  for  lighting  the  streets  of  this  city.” 

On  authority  of  this  resolution  the  three  executive  officials 
named  granted  franchises  to  two  companies,  one  of  which 
was  not  incorporated  until  six  years  after  the  original  resolu¬ 
tion  was  passed.  Litigation  arose  and  it  was  held  by  the 
Court  of  Common  Pleas  that  the  board  of  aldermen  had  no 
power  to  delegate  its  function  of  giving  consent  to  any  other 
authority.  Thereupon,  on  September  1,  1884,  a  resolution 
was  adopted  repealing  the  general  resolution  of  1876,  but 
providing  that  this  repeal  should  not  prejudice  or  affect  any 
right,  interest,  privilege  or  power  which  had  theretofore 
“  arisen,  accrued  or  been  conferred  ”  by  the  original  resolu¬ 
tion  or  by  action  of  the  executive  officers  designated  by  it. 
All  rights  and  privileges  granted  by  these  officials  under  the 
terms  and  provisions  of  the  old  resolution  were  expressly 
“  confirmed,  ratified  and  approved.”  Furthermore,  the  state 
legislature  in  an  amendment  to  the  “  Consolidation  Act,”  as 
the  New  York  City  charter  was  known  in  those  days,  en¬ 
acted  in  1885,  inserted  after  the  clause  giving  to  the  com¬ 
mon  council  the  right  to  regulate  the  opening  of  the  streets 
for  the  laying  of  gas  and  water  mains  the  following  pro¬ 
vision  : 1 

“  Nothing  in  this  subdivision  shall  apply  to  or  shall  affect  or  impair 
the  right  to  lay  such  pipes  and  mains  in  the  streets,  avenues  and  public 
places  of  said  city,  heretofore  conferred  or  intended  to  be  conferred 
upon  any  corporation,  by  the  Mayor,  the  Comptroller  and  the  Commis¬ 
sioner  of  Public  Works,  acting  under  and  in  conformity  with  the  reso¬ 
lution  of  the  common  council  adopted  and  approved  in  the  month  of 
December,  1876;  and  auy  and  all  grants  made  by  such  officers  under 
and  pursuant  to  said  resolution,  prior  to  April  21st,  1883,  are  hereby  in 
all  respects  ratified  and  confirmed.” 

Prior  to  the  passage  of  the  general  resolution  of  1876, 
the  City  of  New  York  had  been  enlarged  so  as  to  include 
call  that  portion  of  the  present  borough  of  the  Bronx  on  the 
mainland  west  of  the  Bronx  River.  All  of  the  companies 
now  operating  in  the  City  of  New  York  whose  rights  have 
come  down  from  companies  that  operated  during  the  period 

1  Laws  of  New  York,  1885,  Chapter  530,  Section  2. 


ARTIFICIAL  GAS  FRANCHISES. 


553 


between  1876  and  1884,  when  this  resolution  was  in  effect, 
claim  perpetual  franchises  under  it,  without  reference  to 
whether  the  original  companies  received  any  additional  au¬ 
thority  from  the  executive  officers  named  by  the  resolution 
or  not.  As  already  stated,  only  two  franchises  were  granted 
by  these  officers.  The  earlier  of  these  was  given  to  the 
Municipal  Gas  Light  Company  of  New  York  on  March  22, 
1877.  Important  conditions  were  attached  to  this  grant. 
The  company’s  gas  works  were  to  be  conducted  so  as  not  to 
be  “  in  any  way  detrimental  to  the  public  health,”  or  so 
as  otherwise  to  create  a  nuisance.  The  gas  furnished  by  the 
company  was  to  be  of  the  best  quality  of  illuminating  gas  of 
not  less  than  16  candle-power  when  tested  at  a  distance  of 
not  less  than  one  mile  from  the  place  of  manufacture.  The 
company  was  to  supply  the  public  lamps  along  its  mains  at 
a  maximum  rate  of  $20  per  year  for  each  lamp  burning  3833*4 
hours  and  consuming  3  feet  of  gas  per  hour  under  a  pres¬ 
sure  of  1  inch.  This  rate  for  public  lighting  was  to  “  in¬ 
clude  gas,  lighting,  extinguishing,  cleaning,  repairing,  re- 
glazing  and  painting  the  lamp  posts  and  lanterns,  replacing 
the  cocks,  tubes,  burners,  cross  heads,  lamp  irons  and 
lanterns.”  The  company’s  maximum  charges  for  fitting  up 
and  repairing  lamp  posts  were  fixed  as  follows: 


For  fitting  up  each  lamp-post,  $10.00 

For  straightening  each  lamp-post,  1.50 

For  releading  each  column,  1.50 

For  refitting  each  column  3.50 

For  removing  each  lamp-post  3.50 

For  resetting  each  lamp-post  10.00 


It  was  also  provided  that  if  at  any  time  during  the  con¬ 
tinuance  of  the  grant  in  the  opinion  of  the  commissioner  of 
public  works,  the  cost  of  producing  or  manufacturing  gas 
had  been  reduced  so  as  to  admit  of  the  lighting  of  public 
lamps  at  a  lower  rate,  then  three  arbitrators  were  to  be  ap¬ 
pointed  for  the  purpose  of  determining  “a  fair  and  equi¬ 
table  rate  ”  below  that  sum.  Gas  was  to  be  furnished  to  public 
buildings  and  city  offices  on  the  lines  of  the  company’s 
mains  at  a  rate  not  in  excess  of  $2  per  1000  feet;  and  after 
January  1,  1878,  gas  was  to  be  supplied  to  private  consumers 
at  a  maximum  rate  of  $2.40.  It  was  also  provided,  as  in  the 
Harlem  Gas  Light  Company’s  legislative  charter,  that 


554 


MUNICIPAL  FRANCHISES. 


no  consumer  should  be  deprived  of  gas  on  account  of  his 
refusal  to  pay  or  on  account  of  a  dispute  as  to  the  bill 
rendered  by  the  company  until  such  consumer  had  been 
served  with  an  affidavit  of  the  company’s  inspector  as  to  the 
correctness  of  the  meter.  The  common  council  was  to  have 
the  right  to  order  the  company’s  pipes  extended  along  any 
of  the  streets  of  the  city,  with  this  limitation,  namely,  that 
the  company  should  not  be  compelled  to  spend  more  than 
$10,000  a  year  in  laying  mains.  The  company’s  trenches 
were  to  be  filled  immediately  after  the  pipes  had  been  laid 
and  the  earth  was  to  be  thoroughly  rammed  as  it  was  thrown 
into  the  trench,  and  the  pavement  was  to  be  replaced  in  a  good 
and  workmanlike  manner  satisfactory  to  the  commissioner 
of  public  works;  otherwise  the  work  might  be  done  by  the 
city  at  the  company’s  expense.  The  company  agreed  to  be 
governed  by  the  city  ordinances  and  the  regulations  im¬ 
posed  by  the  commissioner  of  public  works  relative  to  the 
laying  of  mains,  the  protection  and  filling  of  trenches,  the 
taking  up  and  replacing  of  pavements  and  the  lighting  and 
maintenance  of  public  lamps.  The  franchise,  unless  sooner 
repealed  by  the  common  council  for  failure  on  the  part  of 
the  company  to  perform  any  of  the  conditions  of  this  grant, 
was  to  continue  for  a  period  of  thirty  years,  but  was  not  to 
be  assigned  or  transferred  by  the  company  without  the  previ¬ 
ous  consent  of  the  common  council.  It  was  expressly  pro¬ 
vided  that  this  grant  should  not  be  considered  exclusive,  and 
that  the  permission  was  not  to  become  operative  until  the 
company  had  signified  its  assent  to  the  conditions  imposed. 
As  a  matter  of  fact,  the  company  at  once  accepted  the  grant 
upon  the  prescribed  terms. 

The  other  grant  to  which  reference  has  been  made  was 
given  to  the  Equitable  Gas  Light  Company  on  December  26, 
1882.  Several  new  and  important  conditions  were  imposed 
upon  this  company.  It  was  provided  that  the  gas  furnished 
should  be  of  25  candle-power  and  that,  “  as  regards  purity, 
the  gas  shall  be  free,  within  limits  not  injurious  to  the  pub¬ 
lic  health,  from  ammonia,  sulphuretted  hydrogen  and  other 
sulphur  and  noxious  compounds.”  The  maximum  rate  for 
public  lamps  consuming  three  feet  of  gas  per  hour  under  a 
pressure  of  one  inch  and  burning  4000  hours  was  to  be  $12. 
It  was  also  stipulated  that  whenever  the  public  authorities 


ARTIFICIAL  GAS  FRANCHISES. 


555 


issued  a  call  for  proposals  or  estimates  for  supplying  light 
for  public  lamps,  the  company  should  submit  a  bid  for 
furnishing  gas  and  maintaining  lamps  situated  on  the  lines 
of  its  mains  at  not  to  exceed  the  specified  rate.  The  price 
of  gas  for  public  buildings  situated  along  the  company’s 
mains  was  limited  to  $1.50  per  1000  cubic  feet,  and  the  com¬ 
pany  was  required  to  submit  proposals  for  furnishing  gas  at 
this  rate  whenever  the  city  called  for  estimates  for  lighting 
public  buildings,  markets,  armories  or  city  offices.  The  rate 
to  private  consumers  was  limited  to  $1.75,  and  the  city  re¬ 
served  the  right  to  compel  an  extension  of  the  company’s 
mains  along  any  streets  designated  by  the  common  council, 
with  the  limitation  that  the  company  should  not  be  required 
to  spend  more  than  $20,000  a  year  on  such  extensions.  The 
pipes  were  to  be  laid  so  as  not  to  interfere  with  the  sewers 
or  water  mains.  No  street  was  to  be  opened  by  the  company 
without  a  permit  from  the  commissioner  of  public  works. 
The  company  was  required  to  render  a  weekly  report  to  the 
commissioner  of  all  openings  made  in  the  pavements  during 
the  preceding  week,  including  openings  for  the  laying  or 
repairing  of  service  pipes,  the  repairing  of  gas  mains  or  the 
discovery  and  stoppage  of  leaks.  It  was  also  to  render  a 
monthly  report  of  all  gas  mains  laid,  “  stating  on  which  side 
of  the  street  the  mains  were  laid  and  from  and  to  what  streets, 
the  distance  from  the  curb,  the  depth  of  the  trench  and  the 
diameter  of  the  mains  laid.”  The  company  was  required  to 
commence  the  erection  of  gas  works  within  six  months  and 
was  to  spend  at  least  $200,000  on  its  works  before  laying 
more  than  one  mile  of  pipes.  Illuminating  gas  was  to  be 
distributed  by  the  company  within  two  years  from  the  ac¬ 
ceptance  of  this  grant,  which  was  to  continue  for  a  period 
of  thirty  years  unless  sooner  revoked  on  account  of  the  com¬ 
pany’s  failure  to  fulfil  its  conditions.  The  company  was  to 
pay  into  the  city  treasury  20  cents  per  lineal  foot  of  trench 
opened  for  mains.  It  was  forbidden  to  “  make  or  enter  into 
any  combination,  arrangement  or  agreement  with  any  other 
company  or  companies  in  regard  to  the  amount  of  gas  mains 
to  be  laid  or  to  the  streets  in  which  mains  are  to  be  laid,  or 
in  regard  to  the  quantity  of  illuminating  gas  to  be  manu¬ 
factured,  or  the  price-  for  which  gas  is  to  be  sold,  exceeding 
the  prices  fixed  in  these  conditions.”  In  case  the  company 


556 


MUNICIPAL  FRANCHISES. 


violated  this  prohibition  the  grant  was  to  become  null  and 
void  without  further  action  on  the  part  of  the  city.  This 
grant  was  also  accepted  subject  to  the  conditions  prescribed. 

Two  }rears  later  six  of  the  principal  gas  companies  of  the 
city  combined  to  form  the  Consolidated  Gas  Company  and 
capitalized  their  franchises  at  $7,781,000.  The  value  of  the 
tangible  assets  of  the  six  constituent  companies,  according 
to  an  inventory  made  at  the  time,  amounted  to  a  little  less 
than  $30,000,000.  This  consolidation  was  effected  for  the 
purpose  of  escaping  from  the  “horrors  of  war.” 

Two  years  later  still  another  company  came  into  the  field. 
By  chapter  248  of  the  laws,  of  1886,  entitled  “  an  act  to 
facilitate  the  supply  of  illuminating  gas  in  the  City  of  New 
York  at  a  reasonable  price,”  the  legislature,  without  the  ap¬ 
proval  of  the  governor,  gave  to  the  Standard  Gas  Light  Com¬ 
pany  of  the  City  of  New  York  authority  to  lay  gas  mains 
in  all  the  streets  and  public  places  of  the  city.  The  gas  sup¬ 
plied  was  to  be  of  25  candle-power  and  the  rate  charged  to 
be  no  greater  than  $1.50  per  1000  feet.  It  was  provided, 
however,  that  the  company  was  to  be  subject  to  the  provisions 
of  any  general  laws  that  might  be  passed  regulating  the  price 
of  gas  in  the  City  of  New  York.  It  was  provided  that  the 
company  should  “  not  consolidate,  or  in  any  way  unite  with 
any  other  gas  company  in  said  city,  or  in  any  way  pool  its 
earnings  or  receipts  with  any  other  company  or  organization 
organized  for  the  distribution  and  sale  of  illuminating  gas.” 
The  rate  to  be  charged  for  gas  supplied  to  public  buildings 
was  not  to  exceed  $1.25  per  1000  feet.  Street  lamps  along 
the  company’s  lines  were  to  be  supplied  at  a  maximum  rate 
of  $12.50  per  annum  for  each  lamp  burning  3833^  hours 
and  consuming  three  feet  of  gas  per  hour  under  a  pres¬ 
sure  of  one  inch.  It  was  expressly  provided  that  the  com¬ 
pany  was  to  file  with  the  city  comptroller  a  stipulation  or 
agreement  covering  these  terms  and  conditions,  and  that  if 
after  filing  such  stipulation  the  company  violated  its 
terms,  the  attorney-general  should  institute  proceedings 
to  forfeit  and  annul  the  charter  and  corporate  rights  of  the 
company.  This  company  is  still  operating,  but  is  controlled 
through  stock  ownership  by  the  Consolidated  Gas  Com¬ 
pany. 

Finally  in  1892  still  another  general  gas  franchise  for 


ARTIFICIAL  GAS  FRANCHISES. 


557 


the  City  of  New  York  was  granted  by  the  legislature.1  This 
grant  was  approved  by  the  Governor,  April  19,  1892,  and 
gave  to  the  East  River  Gas  Company  of  Long  Island  City 
most  remarkable  powers.  This  company  was  already  sup¬ 
plying  gas  in  Long  Island  City  as  the  successor  to  a  chain 
of  companies  that  had  been  in  operation  probably  since  1853. 
By  its  new  grant,  it  acquired  the  right  to  supply  both  gas 
and  electricity  in  the  City  of  New  York.  At  the  time  this 
act  was  passed,  Long  Island  City  was  not  a  part  of  the  City 
of  New  York,  so  that  the  company  was  in  a  sense  a  “for¬ 
eign  ”  corporation  so  far  as  New  York  City  was  concerned. 
This  company  was  “  authorized,  without  other  or  further 
authority  of  law  or  ordinance,  to  lay  and  maintain  requisite 
conductors,  mains  and  pipes  through  and  under  any  streets, 
avenues,  or  public  places  99  of  the  city.  The  company  was  also 
expressly  authorized  to  construct  and  maintain  mains  under 
and  across  the  East  River  and  across  any  intervening  land 
belonging  to  the  City  of  New  York  or  to  private  persons.  It 
was  provided,  however,  that  the  company’s  river  mains 
should  be  so  laid  and  maintained  as  not  to  obstruct  naviga¬ 
tion,  commerce  or  anchorage  of  any  navigable  waters,  with¬ 
out  the  consent  of  the  Secretary  of  War.  The  company  was 
given  the  right  to  acquire  real  estate  easements  in  land  by 
condemnation  or  purchase.  A  tax  of  three  per  cent  of  the 
company’s  gross  receipts  from  “  gas  furnished  by  it  to  pri¬ 
vate  and  public  buildings  in  the  City  of  New  York  through 
mains  laid  by  it  as  herein  authorized ”  was  imposed  for  the 
benefit  of  the  city,  payments  to  be  made  annually.  It  was 
provided  that  in  laying  and  maintaining  its  gas  pipes  the 
company  should  be  subject  only  to  such  regulations  not  in-? 
consistent  with  the  powers  conferred  upon  it  as  might  from 
time  to  time  be  prescribed  by  the  department  of  public 
works  of  the  city.  The  company  was  expressly  given  the 
right  to  supply  gas  and  electricity  to  any  other  company  en¬ 
gaged  in  the  lighting  business  in  the  City  of  New  York.  It 
was  also  authorized  to  lease  any  property  of  any  other  com¬ 
pany  engaged  in  supplying  gas  and  electricity  in  the  city 
upon  such  terms  as  should  be  agreed  upon  by  the  boards  of 
directors  and  trustees  of  the  respective  companies,  and  be 
assented  to  in  writing  by  the  holders  of  two-thirds  of  the 

1  taws  of  New  York,  1892,  Chapter  338. 


558 


MUNICIPAL  FRANCHISES. 


V 


capital  stock  of  each  company  concerned.  It  was  provided 
that  nothing  in  this  act  should  authorize  any  increase  in  the 
price  of  gas  then  lawfully  charged  in  the  City  of  New  York, 
but  the  company  was  expressly  empowered  to  continue  to 
charge  for  gas  in  Long  Island  City  the  price  then  authorized 
by  law.  Finally,  “  all  acts  or  parts  of  acts,  general,  private 
or  local,  inconsistent  with,  impairing  or  limiting  the  rights 
or  powers  conferred  by  this  act,  so  far  as  they  are  incon¬ 
sistent  with,  impair,  limit  or  impose  other  or  additional  con¬ 
ditions  upon  the  exercise  of  such  rights  or  powers,”  were  as 
to  this  company  expressly  repealed. 

Two  years  after  the  passage  of  this  act,  the  entire  capital 
stock  of  the  East  River  Gas  Company  was  taken  over  by 
another  corporation,  which  later  was  merged  with  the 
Equitable  Gas  Light  Company  into  the  New  Amsterdam  Gas 
Company.  The  original  New  Amsterdam  Gas  Company  had 
acquired  no  local  franchises.  It  is  now  operating  as  a  sub¬ 
sidiary  of  the  Consolidated  Gas  Company.  The  relations 
between  the  New  Amsterdam  Gas  Company  and  the  East 
River  Gas  Company  of  Long  Island  City  are  so  intimate  as  to 
give  rise  to  the  claim  on  the  part  of  these  companies  that  it 
would  be  impossible  to  separate  their  property  and  assets  in 
a  report  to  the  Public  Service  Commission.  On  the  other 
hand,  they  claim  that  the  separate  identities  of  the  two  com¬ 
panies  has  been  so  well  guarded  in  law  and  contract  as  to 
make  it  impracticable  for  the  two  companies  to  merge  their 
corporate  entities.  For  one  purpose  they  are  so  merged  that 
they  cannot  tell  each  other  apart;  for  another  purpose  they 
are  so  separate  that  they  could  not  merge  if  they  desired  to 
do  so. 

In  addition  to  the  companies  and  franchises  already  de¬ 
scribed,  there  are  three  others  operating  in  portions  of  the 
Bronx  which  are  affiliated  with  the  Consolidated  Gas  Com¬ 
pany’s  system.  Their  franchises  were  obtained  from  the 
towns  and  villages  having  jurisdiction  north  of  the  Harlem 
River  and  were  acquired  prior  to  the  annexation  of  this  dis¬ 
trict  to  New  Yrork  City  in  1874  and  1895.  There  is  also  one 
small  independent  company  supplying  gas  and  electricity  in  a 
portion  of  The  Bronx.  All  the  companies  whose  franchises 
have  been  described  are  absolutely  controlled  by  the  Con¬ 
solidated  Gas  Company.  By  any  reasonably  strict  construe- 


ARTIFICIAL  GAS  FRANCHISES. 


559 


tion  of  franchise  rights,  most  or  all  of  the  rights  con¬ 
ferred  upon  the  various  gas  companies  by  the  old  City  of 
New  York  have  expired  or  been  forfeited.  To  bolster  up 
their  enormous  properties,  however,  these  companies  have 
resorted  to  certain  most  extraordinary  claims  in  regard  to 
their  franchise  rights.  Starting  with  the  accepted  judicial 
doctrine  in  the  State  of  Yew  York  that  a  franchise  not  ex¬ 
pressly  limited  by  its  terms  is  perpetual,  the  companies  make 
the  following  claims: 

1.  That  exclusive  franchises  granted  for  a  certain  period 
of  years  are  perpetual  after  the  expiration  of  that  period, 
although  no  longer  exclusive. 

2.  That  franchises  granted  for  a  limited  period  of  years 
for  the  purpose  of  laying  gas  mains  are  perpetual  after  the 
expiration  of  that  period  for  the  maintenance  of  mains  al¬ 
ready  laid. 

3.  That  permits  issued  by  the  city’s  administrative  au¬ 
thorities  or  resolutions  passed  by  the  common  council  direct¬ 
ing  that  gas  mains  be  laid  in  certain  specified  streets 
constitute  perpetual  franchises. 

4.  That  wherever  mains  have  been  laid  without  express 
authority,  perpetual  franchise  rights  have  been  secured 
through  acquiescence. 

5.  That  even  where  franchises  have  expired  by  their  ex¬ 
press  terms,  the  companies  cannot  be  compelled  to  remove 
their  property  from  the  streets. 

The  doctrine  of  franchises  by  acquiescence  has  received 
considerable  support  by  a  decision  of  the  Appellate  Division 
of  the  Supreme  Court  relative  to  the  franchise  rights  of 
the  New  York  and  Richmond  Gas  Company,  which  operates 
in  Staten  Island.1  A  few  years  ago  the  city  refused  to  issue 
a  permit  to  this  company  for  the  opening  of  certain  streets 
for  extensions  of  the  company’s  mains  on  the  ground 
that  the  company  had  no  franchises  in  the  districts  affected. 
The  company,  on  the  other  hand,  claimed  that  it  had  suc¬ 
ceeded  to  all  the  rights  and  franchises  of  the  original  com¬ 
pany  which  began  to  furnish  gas  in  1856.  While  unable  to 
present  to  the  court  any  documents  showing  that  the  muni¬ 
cipal  authorities  of  the  old  townships  had  expressly  con¬ 
sented  to  the  laying  of  gas  mains  originally,  the  company 

*  Case  of  People  ex  rel.  New  York  db  Richmond  Gas  Co.,  vs.  Cromwell ,  89  Add. 
Dir.  291. 


560 


MUNICIPAL  FRANCHISES. 


held  that  inasmuch  as  the  mains  had  been  laid  without  pro¬ 
test  and  gas  had  been  supplied  with  the  knowledge  of  the 
public  authorities  for  nearly  fifty  years,  the  city  was  estopped 
from  denying  the  company’s  rights  in  the  streets.  The  court 
upheld  the  company’s  contention  and  the  case  was  not  ap¬ 
pealed  to  the  highest  court.  At  the  present  time,  therefore, 
the  doctrine  of  franchises  by  acquiescence  is  in  good  and 
regular  standing  in  the  City  of  Yew  York,  although  it  is 
extremely  doubtful  whether  the  Court  of  Appeals  would 
sustain  many  of  the  claims  made  by  the  companies  on  the 
strength  of  the  decision  in  the  case  referred  to. 

By  the  recent  decision  of  the  United  States  Supreme 
Court  in  the  80-cent  gas  case,1  the  right  of  the  legislature 
to  regulate  rates  was  substantially  upheld.  The  court  ruled, 
however,  that  the  franchise  values  capitalized  by  the  Con¬ 
solidated  Gas  Company  in  1884  under  the  authority  of  the 
laws  of  Yew  York  now  constitute  a  portion  of  the  company’s 
property  upon  which  it  is  entitled  to  earn  a  six  per  cent 
profit.  This  decision  leaves  the  way  open,  however,  to  pre¬ 
vent  by  rate  regulation  any  increase  in  the  value  of  gas  fran¬ 
chises.  Furthermore,  the  court  did  not  pass  upon  the  valid¬ 
ity  of  any  of  the  specific  franchises  claimed  by  the  Consolidated 
Gas  Company  and  its  constituents. 

251.  The  sliding  scale— Boston. — The  first  gas  franchise 
in  Boston  was  granted  by  the  board  of  aldermen  August  27, 
1822,  to  certain  individuals  who  later  received  a  corporate 
charter  from  the  Massachusetts  legislature  under  the  name  of 
the  Boston  Gas  Light  Company.  By  their  original  franchise 
from  the  city  they  were  authorized  to  lay  iron  gas  pipes  un¬ 
derneath  the  sidewalks  subject  to  the  direction  of  the  com¬ 
missioner  of  highways.  A  little  later  they  were  given  the 
right  to  cross  the  street  with  their  pipes.  Under  the  com¬ 
pany’s  state  charter  it  was  required  to  get  the  consent  of 
the  mayor  and  board  of  aldermen  before  opening  the  ground 
in  any  part  of  the  public  streets.  As  a  matter  of  fact,  gas 
was  not  supplied  until  towards  the  close  of  1828.  The  price 
from  that  date  to  1844  was  $5  per  1000  cubic  feet  and  has 
since  been  gradually  reduced  till  on  July  1,  1907,  it  was 
fixed  at  80  cents.2 

1  Decided  Jan.  4,  1909.  See  Section  47,  ante . 

1  Annals  of  the  American  Academy  of  Political  and  Social  Science ,  May,  1908, 
“  The  Boston  Consolidated  Gas  Company :  its  Relation  to  the  Public,  its  Em¬ 
ployees  and  Investors,”  by  J.  L,  Richards,  op.  cit .,  p.  593. 


ARTIFICIAL  GAS  FRANCHISES. 


561 


The  experience  of  Boston  with  gas  franchises  has  been  in 
many  respects  similar  to  that  of  other  cities.  In  Massa¬ 
chusetts,  however,  gas  companies  are  authorized  under  gen¬ 
eral  law  to  “  dig  up  and  open,  the  ground  in  any  of  the 
streets,  avenues  and  highways  ”  of  the  city  “  so  far  as  is 
necessary  to  accomplish  the  objects  of  the  corporation, ”  but 
this  may  be  done  only  “  with  the  consent  in  writing  of  the 
mayor  and  aldermen/’1  Cities  are  authorized  to  construct, 
purchase,  lease  and  maintain  within  their  corporate  limits 
one  or  more  plants  for  the  manufacture  or  distribution  of 
gas.2  They  are  not  permitted,  however,  during  the  pendency 
of  proceedings  to  bring  about  municipal  ownership,  arbi¬ 
trarily  to  revoke  any  rights  granted  to  a  person  or  corpo¬ 
ration  engaged  in  the  gas  business.  It  is  also  provided  by 
the  statutes  that  in  any  city  where  a  gas  company  is  in 
active  operation  no  other  gas  company  shall  dig  up  and  open 
the  streets  for  the  purpose  of  laying  gas  pipes  without  the 
consent  of  the  local  authorities  “  granted  after  notice  by 
publication  or  otherwise  to  all  parties  interested  and  a 
public  hearing.”  While  the  local  authorities  unquestion¬ 
ably  have  the  right,  subject  to  the  approval  of  the  State 
Board  of  Railroad  Commissioners  to  revoke  street  railway 
locations,  there  seems  to  be  no  provision  of  law  upon  which 
to  base  a  claim  of  similar  authority  in  regard  to  the  loca¬ 
tions  of  gas  mains.  Moreover,  it  is  believed  that  a  duly 
organized  gas  company  could  not  be  prevented  from  laying 
its  mains  by  arbitrary  action  of  the  city  authorities  and 
could  not  be  compelled  to  accept  onerous  conditions  other 
than  reasonable  regulations  for  the  opening  and  care  of  the 
streets  and  the  protection  of  life  and  property.3 

A  considerable  number  of  gas  companies  were  incorporated 
from  time  to  time  by  special  acts  of  the  state  legislature  to 
supply  gas  in  different  portions  of  Boston  and  its  environs. 
Finally,  in  1903  an  act  was  passed  to  bring  about  the  con¬ 
solidation  of  eight  existing  companies  to  form  the  Boston 
Consolidated  Gas  Company,  which  was  to  be  organized  tc  for 
the  purpose  of  making,  selling  and  distributing  gas  for  light 
or  other  heating,  cooking,  chemical  and  mechanical  pur- 

1  Revised  Laws,  Chapter  110,  Section  76. 

*  Ibid.,  Chapter  34. 

•  Letter  of  F.  E.  Barker,  Chairman  of  the  Board  of  Gas  &  Electric  Light  Com¬ 
missioners,  June  2,  1908,  to  Milo  R.  Maltbie,  of  the  Public  Service  Commission, 
New  York  City. 


562 


MUNICIPAL  FRANCHISES. 


poses.”1  This  new  company  was  authorized  to  take  over 
from  the  eight  constituent  companies  all  their  “  property, 
locations,  rights,  licenses,  powers,  privileges  and  franchises  ” 
except  as  otherwise  expressly  provided.  The  special  charter 
of  one  of  these  companies,  the  Massachusetts  Pipe  Line  Gas 
Company,  was  amended  so  that  it  should  no  longer  be  com¬ 
pulsory  for  the  local  authorities  to  grant  the  company  loca¬ 
tions  for  its  pipe  lines.  This  particular  charter  already 
provided  that  the  company  should  be  subject  to  the  regula¬ 
tions  and  restrictions  made  by  the  local  authorities  in  regard 
to  their  street  work,  that  it  should  restore  all  streets  opened 
by  it  to  as  good  a  state  of  repair  as  they  were  in  when  opened 
“  and  to  the  satisfaction  of  the  local  authorities  of  the  city.” 
Locations  granted  by  the  local  authorities  were  made  ex¬ 
pressly  subject  to  revocation  with  the  consent  of  the  State 
Board  of  Gas  and  Electric  Light  Commissioners.  This 
company’s  charter  was  also  amended  so  as  to  require  the  ap¬ 
proval  of  the  local  authorities  for  the  leasing,  purchase  or 
operation  of  the  works  or  distributing  system  of  any  other 
gas  company.  The  Boston  Consolidated  Gas  Company  was 
by  express  provision  of  its  charter  endowed  with  the  privi¬ 
leges  conferred  by  the  law  authorizing  the  purchase  of  gas 
works  by  cities.  The  privilege  of  most  importance  in  this 
connection  was  the  right  to  have  the  company’s  plant  pur¬ 
chased  by  the  city  at  its  fair  market  value  as  a  preliminary 
to  the  establishment  of  municipal  gas  works. 

By  another  special  act  of  the  State  Legislature  approved 
May  26,  1906,  the  sliding  scale  was  established  to  determine 
the  rates  which  this  company  might  charge  for  its  product.2 
The  standard  rate  fixed  by  this  statute  for  gas  supplied  to 
the  company’s  patrons  was  to  be  90  cents  per  1000  cubic  feet, 
and  the  standard  rate  of  dividends  to  be  paid  by  the  company 
to  its  stockholders  was  fixed  at  7  %  on  the  par  value  of  the 
capital  stock.  It  was  then  provided  that  if  during  any  year 
the  maximum  net  rates  charged  by  the  company  had  been 
less  than  the  standard  rate  of  90  cents,  during  the  following 
year  the  company  should  be  authorized  to  declare  dividends 
exceeding  the  standard  rate  of  7  %  to  the  amount  of  1/5  of 
1  %  additional  for  every  one  cent  of  reduction  in  the  maxi¬ 
mum  net  price  of  gas  below  the  standard  price.  The  com- 

1  Acts  of  1903,  Chapter  417.  2  Acts  of  1906,  Chapter  422. 


ARTIFICIAL  GAS  FRANCHISES. 


563 


pany  was  required  to  publish  annually  in  the  month  of  Sep¬ 
tember  in  one  or  more  newspapers  of  Boston  a  report  of  the 
preceding  fiscal  year  showing  the  cost  per  1000  cubic  feet  of 
gas  in  the  holders.  This  cost  was  to  be  itemized  so  that 
wrages  at  the  works  and  the  main  items  of  materials  would 
be  shown  separately.  This  report  was  also  to  show  the  cost 
per  1000  feet  of  distribution  and  the  amount  per  1000  feet 
■charged  for  depreciation  or  maintenance  repairs,  together 
with  any  other  items  of  account  that  might  be  prescribed 
from  timd  to  time  by  the  State  Board  of  Gas  and  Electric 
Light  Commissioners.  This  board  was  given  authority  upon 
petition  of  the  ma}mr  or  board  of  aldermen  to  revise,  after  a 
hearing,  the  company’s  method  of  determining  the  cost  of 
gas  and  “  to  determine  finally  and  conclusively  the  actual 
cost  of  the  gas  furnished,  and  the  clear  profits  made  by  the 
said  company  applicable  to  payment  of  dividends  ”.  It  was 
provided  that  if  the  profits  applicable  to  dividends  should  in 
any  year  amount  to  more  than  enough  to  pay  the  dividends 
permitted  under  the  provisions  already  described,  the  excess 
to  the  extent  of  1%  per  annum  of  the  par  value  of  the  com¬ 
pany’s  capital  stock  might  be  invested  in  securities  for  the 
purpose  of  accumulating  a  reserve  fund.  The  maximum  limit 
of  this  fund  was  to  be  1/20  of  the  par  value  of  the  company’s 
capital  stock.  This  fund  could  be  used  from  time  to  time  to 
meet  any  extraordinary  claim  or  charge  arising  against  the 
company  “  from  fire,  accident  or  other  circumstances  which 
due  care  and  management  could  not  have  prevented.”  This 
fund  could  also  be  used  for  the  purpose  of  supplementing  the 
clear  profits  of  the  business  applicable  to  the  payment  of 
dividends  whenever  such  profits  were  insufficient  to  pay  the 
authorized  dividend  rate.  It  was  provided  that  if  in  any 
year  the  company’s  clear  profits  applicable  to  the  payment  of 
dividends  should  exceed  the  amounts  expended  for  that  pur¬ 
pose  and  the  amounts  to  be  set  aside  for  the  reserve  fund, 
such  excess  of  profits  should  be  paid  to  the  cities  and  towns 
to  which  the  company  supplied  gas  in  proportion  to  the  num¬ 
ber  of  miles  of  mains  in  each  of  them.  It  was  also  provided 
that  after  the  expiration  of  ten  years  from  June  30,  1906, 
the  Board  of  Gas  and  Electric  Light  Commissioners  should 
have  authority,  upon  the  petition  of  the  company  or  of  the 
mayor,  to  lower  or  raise  the  standard  price  of  gas  “  to  such 


564 


MUNICIPAL  FRANCHISES. 


extent  as  may  justly  be  required  by  reason  of  greater  or  less 
burdens  which  may  be  imposed  upon  the  company,  by  reason 
of  improved  methods  in  the  art  of  manufacture,  by  reason  of 
changes  in  the  prices  of  materials  and  labor,  or  by  reason  of 
changes  in  other  conditions  affecting  the  general  cost  of  the 
manufacture  and  distribution  of  gas.” 

Under  the  terms  of  this  charter,  the  price  of  gas  has  been 
successively  reduced  from  90  cents  to  85  cents  and  then  to 
80  cents,  which  has  permitted  the  dividend  rate  to  be  in¬ 
creased  from  7  per  cent  to  8  per  cent  and  then  to  9  per  cent. 

Referring  to  the  organization  of  the  Boston  Consolidated 
Gas  Company  by  acquisition  of  the  properties  of  its  several 
predecessor  companies,  Mr.  Richards,  president  of  this  com¬ 
pany,  in  a  recently  published  article,  said 1 :  “  It  is  well 
known  that  when  the  new  interests  secured  control  of  the 
properties  mentioned,  various  companies  were  looked  upon 
with  disfavor  by  the  public,  and  realizing  that  fact  the 
present  management  has  endeavored  to  conduct  the  business 
affairs  of  the  corporations  on  a  broad,  liberal,  business  basis, 
believing  that  one  of  the  most  valuable  assets  that  a  public 
service  corporation  can  have  is  the  confidence  of  the  public.” 

•  In  support  of  this  statement  and  to  prove  that  the  new  policy 
had  been  successful,  Mr.  Richards  quotes  from  a  magazine 
article  written  bv  Mr.  Louis  D.  Brandeis,  one  of  Boston’s 
best-known  citizens,  as  follows: 

“Boston  has  reaped  from  the  sliding  scale  system  far  more  than 
cheaper  gas  and  higher  security  values.  It  has  been  proved  that  a 
public  service  corporation  may  be  managed  with  political  honesty,  and 
yet  successfully,  and  that  its  head  may  become  a  valuable  public  serv¬ 
ant.  The  officers  and  employees  of  the  gas  company  now  devote  them¬ 
selves  strictly  to  the  business  of  making  and  distributing  gas,  instead 
of  dissipating  their  abilities,  as  heretofore,  in  lobbying  and  political 
intrigue.  As  a  result,  gas  properties  which  throughout  the  greater 
part  of  twenty  years  had  been  the  subject  of  financial  and  political 
scandals,  developing  ultimately  bitter  hostility  on  the  part  of  the  people, 
are  now  conducted  in  a  manner  so  honorable  as  to  deserve  and  secure 
the  highest  public  commendation.” 

252.  Gas  franchises  in  other  Massachusetts  cities— Wor¬ 
cester  ;  Springfield;  Somerville. — The  Worcester  Gas  Light 
Company  was  incorporated  by  a  special  act  of  the  legislature 
in  1850  and  made  subject  to  the  provisions,  restrictions  and 
conditions  of  an  ordinance  adopted  by  the  city  council  in 

1  Annals ,  op.  cit .,  vol.  SI,  p.  596. 


ARTIFICIAL  GAS  FRANCHISES. 


565 


the  preceding  year  granting  to  certain  individuals  the  right  to 
erect  coal  gas  works  in  the  city  and  lay  pipes  for  distributing 
gas  through  the  streets.1  It  was  also  provided  that  the  city 
“  shall  have  the  right  to  purchase  the  franchise  of  said  cor¬ 
poration  by  paying  therefor  the  actual  cost  of  the  works  they 
shall  have  erected  with  10  per  cent  interest  thereon  after 
first  deducting  3uch  amounts  as  may  have  been  paid  to  the 
stockholders  as  dividends  upon  the  stock  ”.  These  provisions 
of  law  were  almost  immediately  repealed,  however.  In  place 
of  them  a  new  provision  was  added  to  the  effect  that  “  the 
said  corporation  shall  make  such  extensions  of  their  pipes 
and  furnish  the  gas  in  such  quantities  as  the  city  council 
may  from  time  to  time  direct,  provided  the  city  council 
shall  guarantee  to  said  company  a  profit  of  6  per  cent  per 
annum  on  such  extension.”  2  The  rates  of  charges  to  the  city 
and  the  inhabitants  were  not  to  “  exceed  the  rates  that  may  be 
charged  for  gas  of  similar  kind  and  quality  in  either  of  the 
cities  of  Boston,  New  York  or  Baltimore.”  A  company  of 
the  same  name  and  composed  of  the  same  people  was  incor¬ 
porated  by  another  special  act  of  the  Legislature  a  year 
later.3  The  new  company  was  required  to  assume  all  the 
liabilities  of  “  the  present  proprietors  of  the  gas  light  works 
in  Worcester  in  relation  to  the  making  and  selling  of  gas.” 
It  seems  likely  that  the  legislative  acts  of  1850  were  never 
accepted  or  made  effective  by  the  company.4 

The  general  form  of  permit  for  the  opening  of  streets  by 
the  gas  company,  in  use  in  the  city  of  Springfield,  subjects 
the  grantee  to  certain  conditions.  It  is  provided  that  loca¬ 
tions  for  street  work  shall  be  designated  and  approved  by 
the  city  engineer,  and  that  the  grantee  shall  within  thirty 
days  after  completing  the  work  “  delineate  on  the  plans  for 
underground  work  on  file  with  the  said  city  engineer,  the 
location,  depth  and  materials  used  for  said  work  ”.  Where 
no  such  plan  exists,  a  new  plan  must  be  filed  with  the  city 
engineer  showing  these  details.  It  is  provided  that  the  com¬ 
pany  shall  immediately  notify  the  superintendent  of  streets 
and  sewers  in  each  instance  of  the  commencement  and  com¬ 
pletion  of  the  work  of  laying  mains.  No  gas  mains  may  be 

1  Acts  of  1850,  chapter  29,  referring  to  local  franchise  of  May  3, 1849,  to  Blake, 
Darracott  and  their  associates. 

*  Acts  of  1850,  chapter  237. 

*  Acts  of  1851,  chapter  159. 

4  Letter  of  F.  E.  Barker,  June  9,  1908. 


566 


MUNICIPAL  FRANCHISES. 


laid  “  under  or  in  close  proximity  to  the  roots  of  any  tree, 
or  so  as  to  interfere  with  any  water  pipe  or  any  other  city 
property  or  the  proper  access  thereto,  in  any  public  street, 
highway  or  place."  Streets  which  have  been  opened  must 
be  restored  to  good  condition.  All  rights  granted  are  con¬ 
ditioned  upon  the  express  agreement  “  that  these  privileges 
in  the  streets  and  public  places  are  not  to  operate  in  any 
way  as  an  enhancement  of  said  company’s  properties  or 
values,  or  be  an  asset  or  item  of  ownership  in  the  appraisal 
thereof,  in  the  event  that  said  city  shall  ever  acquire  by 
purchase  any  or  all  of  said  company’s  property.’’ 

The  general  form  of  permit  for  the  laying  of  gas  pipes 
used  by  the  city  of  Somerville  provides  that  the  company 
shall  immediately  restore  the  streets  opened  by  it  to  a  con¬ 
dition  satisfactory  to  the  commissioner  of  streets  and  main¬ 
tain  its  pipes  and  fixtures  at  all  times  in  a  manner  satisfac¬ 
tory  to  him.  The  company  also  agrees  to  indemnify  the  city 
from  any  loss  by  reason  of  the  laying  or  maintenance  of  its 
pipes  or  fixtures.  The  permit  is  granted  expressly  subject  to 
all  provisions  of  law  and  all  existing  or  future  ordinances  of 
the  city  and  orders  of  the  board  of  aldermen.  The  permit 
is  to  become  null  and  void  at  the  option  of  the  board  of 
aldermen  in  case  the  company  fails  to  comply  with  any 
provisions  of  such  laws,  ordinances  or  orders.  The  company 
acquires  no  rights  under  the  permit  until  it  files  with  the 
city  clerk  an  agreement  satisfactory  to  the  city  solicitor 
to  comply  with  the  terms  and  conditions  of  the  permit. 

253.  The  lease  of  a  great  municipal  plant— Phila¬ 
delphia. —The  history  of  the  gas  business  in  Philadelphia 
is  unlike  that  of  most  other  American  cities.  A  proposi¬ 
tion  to  light  the  city  with  gas  was  made  to  the  coun¬ 
cils  as  early  as  1803.  This  proposition,  as  well  as  a  similar 
one  advanced  in  1817,  was  rejected.  Beginning  with  1825 
there  was  an  annual  effort  made  to  induce  the  State  Legis¬ 
lature  to  incorporate  the  Philadelphia  Gas  Light  Company, 
but  the  scheme  wTas  continually  defeated  through  the  in¬ 
fluence  of  members  of  the  city  councils.1  In  1835,  however, 
an  ordinance  was  passed  providing  for  the  construction  of 
gas  works  and  the  incorporation  of  a  gas  company,  with  the 

1  Dr.  Leo  S.  Rowe,  '•'■Relation  of  the  City  of  Philadelphia  to  the  Oas  Supply 
vol.  1,  part  2,  of  the  National  Civic  Federation  Report  on  “  Municipal  and  Private 
Operation  of  Public  Utilities,”  page  588. 


ARTIFICIAL  GAS  FRANCHISES. 


567 


right  reserved  to  the  city  at  any  time  to  take  possession  of 
the  works  and  convert  the  company’s  stock  into  6  per  cent 
bonds.  The  plant  was  completed  in  1836,  and  in  1841  com¬ 
plete  municipal  ownership  was  established.  Thereafter, 
until  1887,  the  Philadelphia  Gas  Works  were  under  the 
control  of  a  Board  of  Trustees  which  stood  somewhat  apart 
from  the  city  government  as  a  whole.  In  1887,  control  of 
the  gas  works  was  taken  away  from  the  trustees,  and  the 
Bureau  of  Gas  was  established  as  an  integral  part  of  the 
municipal  administration. 

On  November  12,  1897,  the  city  executed  a  lease  with  the 
United  Gas  Improvement  Company,  according  to  the  terms 
of  which  the  company  was  to  improve  and  operate  the  gas 
plant  for  a  limited  number  of  years.1  In  the  ordinance 
authorizing  this  lease,  it  is  recited  that  the  sole  source  of 
supply  for  Philadelphia  is  the  city  works  except  for  the  gas 
manufactured  and  supplied  to  the  city  under  contract  by 
the  Philadelphia  Gas  Improvement  Company,  and  except 
that  a  certain  outlying  portion  of  the  city  is  supplied  by  an 
independent  company.  It  is  further  recited  that  “  very  large 
sums  of  money  ought  now  to  be  expended  in  laying  addi¬ 
tional  mains,  services  and  connections,  in  supplying  meters 
and  appurtenances,  and  in  the  erection  of  new  and  addi¬ 
tional  apparatus  necessary  for  the  economical  manufacture, 
storage,  and  distribution  of  gas  sufficient  to  supply  the 
present  and  prospective  demands  for  gas  by  the  city  and  its 
inhabitants  ”.  It  is  also  recited  that  “  the  requirements  of 
the  city  for  other  municipal  purposes  are  of  such  a  pressing 
character  that  it  would  be  extremely  inconvenient  for  it  to 
make  said  expenditures  at  the  present  99 ;  and  that  "it  is 
deemed  desirable  to  secure  by  contract  with  a  desirable 
company  the  maintenance,  operation,  development,  and  ex¬ 
tension  of  its  gas  plant,  and  of  its  system  of  distribution  of 
gas,  for  a  term’  of  years,  and  also  to  resume  at  the  end  of 
said  term  possession  of  its  works  and  plant,  modernized  and 
fully  equipped,  without  impairment  of  the  exclusive  privilege 
of  supplying  gas  within  the  limits  of  said  city  now  vested  in 
it.”  Accordingly,  under  the  terms  of  this  agreement  the  city 
turned  over  its  entire  plant  to  the  company  for  the  period 

1  This  lease  is  reprinted  in  Part  II,  vol.  1,  of  the  National  Civic  Federation  Re¬ 
port,  op.  cit p.  652. 


568 


MUNICIPAL  FRANCHISES. 


beginning  November  12,  1897,  and  ending  December  31, 
1927,  unless  the  lease  should  be  terminated  December  31, 
1907,  under  a  special  option  reserved  to  the  city.  Under  this 
contract  the  company  was  entitled  “  to  retain  possession  of, 
maintain,  change,  alter  and  repair,  and  to  operate  said  ga3 
works  and  appurtenances  and  all  the  property  hereby  leased, 
and  to  lay,  repair,  remove,  relay,  extend,  and  maintain 
mains,  pipes,  services  and  appurtenances  along  and  beneath 
the  surface  of  the  highways,  streets,  avenues,  alleys,  ways 
and  public  places  in  said  city  for  the  supply  and  distribution 
of  gas.”  The  company’s  rights  were  made  exclusive.  The 
company  was  bound  to  observe  the  general  rules  and  regula¬ 
tions  in  force  from  time  to  time  relative  to  the  opening  and 
restoration  of  the  streets.  In  case  the  city  at  any  time  in  the 
future  should  construct  a  suitable  subway,  the  company 
agreed  to  place  the  gas  pipes  in  the  subway  at  its  own  ex¬ 
pense  when  requested  to  do  so  by  the  city,  but  no  rental  was 
to  be  charged  by  the  city  for  the  use  of  such  subway. 

The  company  was  authorized  to  assign  its  contract  and 
to  enter  into  agreements  with  other  companies  “  for  the 
performance,  in  whole  or  in  part,  of  this  contract,”  but  in 
case  of  the  assignment  of  the  lease  the  primary  obligation  for 
the  fulfilment  of  its  terms  was  to  remain  upon  the  United 
Gas  Improvement  Company,  which  was  to  be  held  jointly 
responsible  with  its  assignee  by  the  city.  No  assignment  of 
the  lease  could  take  effect  until  after  the  filing  of  notice 
with  the  city. 

An  inventory  of  the  coal,  coke,  tar  and  lime  on  hand  in 
the  city’s  gas  works  and  of  all  gas  on  hand  was  to  be  pre¬ 
pared  by  the  city,  and  the  value  shown  by  this  inventory  or 
appraisement  was  to  be  paid  by  the  company.  Gas  on  hand 
was  to  be  reckoned  at  the  cost  of  gas  in  the.  holders,  and 
other  items  were  to  be  appraised  at  their  market  price.  Cur¬ 
rent  bills  for  gas  were  to  be  collected  by  the  company,  and 
the  receipts  accruing  from  gas  furnished  prior  to  the  taking 
over  of  the  works,  were  to  be  accounted  for  to  the  city.  The 
company  was  required  to  execute  a  bond  in  the  penal  sum  of 
$1,000,000  conditioned  on  the  faithful  performance  of  the 
obligations  of  the  lease.  The  city’s  rights  under  the  con¬ 
tract  with  the  Philadelphia  Gas  Improvement  Company  for 
the  manufacture  of  gas  were  assigned  to  the  lessee. 


ARTIFICIAL  GAS  FRANCHISES. 


569 


The  city  reserved  the  option,  upon  giving  at  least  six 
months’  notice,  to  terminate  the  lease  and  resume  possession 
of  the  gas  works  on  January  1,  1908.  In  that  case,  how¬ 
ever,  and  prior  to  resumption  of  control,  the  city  was  to  make 
a  payment  to  the  company  that  would  be  a  reimbursement  of 
all  sums  expended  by  the  company  u  in  or  about  the  build¬ 
ings,  apparatus,  machinery,  mains,  pipes,  services,  connec¬ 
tions,  meters,  appliances  and  appurtenances  of  the  Phila¬ 
delphia  Gas  Works  ”  and  of  the  gas  works  then  owned  by  the 
Philadelphia  Gas  Improvement  Company.  This  payment 
was  to  include,  however,  only  such  sums  of  money  paid  “  in 
and  about  the  alteration,  enlargement,  removal,  extension, 
betterment  and  improvement  of  all  said  manufacturing  and 
distributive  systems  and  plants,  with  interest  thereon  at  the 
rate  of  6  per  centum  per  annum,  simple  interest ” ;  together 
with  a  sum  equivalent  to  the  appraised  value  of  the  Phila¬ 
delphia  Gas  Improvement  Company’s  property  with  6  per 
cent  interest  from  the  date  of  the  lease  to  the  date  of  pay¬ 
ment.  In  case  the  city  failed  to  pass  an  ordinance  prior  to 
July  1,  1907,  declaring  its  intention  to  terminate  the  lease, 
or  in  case  it  failed  to  pay  over  the  money  due  to  the  company 
on  or  before  December  31,  1907,  the  option  to  terminate  the 
lease  before  1927  would  “  cease  and  be  forever  at  an  end.” 

The  company  was  required  to  file  annual  statements  with 
the  city  controller  showing  in  detail  the  expenditures  during 
the  preceding  year  “  for  alterations,  enlargements,  removals, 
bettei^ments  and  improvements,  not  including  repairs  made 
by  it  in  or  about  the  gas  works  and  for  the  mains,  meters, 
services  and  appurtenances.” 

In  case  the  city  did  not  exercise  its  option  to  terminate  the 
lease  at  the  end  of  1907,  the  contract  would  expire  December 
31,  1927,  and  the  company  would  be  required  to  deliver  over 
to  the  city  the  entire  works  in  good  condition,  including 
alterations,  extensions,  betterments  and  improvements;  and 
also  the  property  of  the  Philadelphia  Gas  Improvement  Com¬ 
pany.  The  entire  works,  including  the  property  last  men¬ 
tioned,  were  to  be  delivered  to  the  city  u  free  and  clear  of  all 
debts  and  obligations  of  every  sort,  kind  and  description  ”. 
The  city  was  also  to  receive  te  the  right  to  use  all  processes 
of  every  kind  useful  in  the  manufacture  of  gas  then  estab¬ 
lished  and  in  use  in  any  of  said  works.”  It  was  expressly 


MUNICIPAL  FRANCHISES. 


570 

stated  as  the  intent  of  the  agreement  that  the  city  at  the 
expiration  of  the  lease  should  “  without  charge  or  cost  receive 
all  of  the  said  works  in  the  condition  of  alteration,  improve¬ 
ment  and  change  in  which  the  same  shall  then  exist,  and  the 
same  shall  be  so  maintained  as  to  be  then  in  first-class  order 
and  condition.”  The  company  was  to  keep  the  property  in¬ 
sured  to  the  extent  that  similar  properties  of  gas  companies 
are  usually  insured,  and  on  the  termination  of  the  contract 
either  in  1907  or  1927,  the  city  was  to  have  the  option  of 
purchasing  all  the  supplies  and  residual  products  on  hand 
at  the  works  at  the  market  price,  or  if  it  chose,  it  might 
require  the  company  to  remove  them  at  its  own  expense. 
Gas  on  hand  at  the  termination  of  the  contract  was  to  be 
accounted  for  to  the  company  at  holder  cost  when  paid  for 
by  consumers.  The  company  agreed  to  spend  at  least  $5,000,- 
000  in  the  improvement  and  extension  of  the  manufacturing 
and  distributing  systems  within  three  years,  and,  during  the 
thirty-year  period  of  the  lease,  to  spend  at  least  $15,000,000 
and  as  much  more  as  should  be  required  for  these  purposes. 
The  company  bound  itself  to  extend  distribution  pipes  on 
such  streets  as  might  be  necessary  to  meet  the  demand  for 
gas,  subject  to  this  limitation,  namely,  that  at  least  one  con¬ 
sumer  for  every  100  feet  of  the  proposed  extension  should 
first  agree  in  writing  to  take  gas  for  a  period  of  not  less  than 
one  year  at  the  general  rates  then  in  force.  The  company 
was  not,  however,  to  be  required  to  lay  pipes  while  there  was 
frost  in  the  ground.  The  expense  of  furnishing  and  laying 
service  pipes  from  the  mains  to  the  consumer’s  property  line 
and  of  furnishing  and  setting  meters,  was  to  be  borne  by  the 
company.  It  was  expressly  declared  to  be  the  intention  of 
the  contracf  that  all  changes  and  improvements  needed  to 
meet  the  demand  for  gas  should  be  made  in  such  a  way  “  as 
shall  maintain  said  gas  works  in  first-class  condition,  with 
the  best  and  mpst  economic  processes  in  use  that  are  cus¬ 
tomary  in  the  best  regulated  gas  works.”  Gas  of  22  candle- 
power,  as  determined  by  tests  made  in  the  presence  of  a 
representative  of  the  city,  was  to  be  furnished  by  the  com¬ 
pany,  and  the  supply  was  to  be  maintained  during  the  con¬ 
tinuance  of  the  lease  unless  prevented  by  accidents  beyond 
the  company’s  control.  If,  after  the  expiration  of  two  years 
from  the  date  of  the  lease,  the  company  failed  to  comply 


ARTIFICIAL  GAS  FRANCHISES. 


571 


with  the  requirements  of  this  contract  relative  to  tests, 
quality  and  candle-power  of  gas,  it  was  to  forfeit  a  penalty 
of  $500  for  each  day  during  which  such  failure  continued. 
All  gas  needed  for  illuminating  purposes  in  public  buildings 
and  for  public  lamps  adjacent  to  the  mains,  was  to  be  fur¬ 
nished  the  city  free  of  cost.  The  public  lamps  were  also  to 
be  lighted  by  the  company,  and  the  city  might  require  an 
addition  of  300  street  lamps  each  year  over  the  number  fur¬ 
nished  during  the  preceding  year.  These  lamps  were  to  be 
lighted  every  night  and  all  night.  Connections,  equipment, 
maintenance  and  repair  of  street  lamps  and  lamp-posts  were 
to  be  furnished  by  the  company  free  of  cost  to  the  city.  The 
price  of  gas  to  private  consumers  was  fixed  at  $1  per  1000 
cubic  feet,  until  changed  by  ordinance.  The  city  was  for¬ 
bidden,  however,  to  reduce  the  price  below  90  cents  before 
December  31,  1907;  below  85  cents  before  December  31, 
1912;  below  80  cents  before  December  31,  1917;  or  below 
75  cents  during  the  remainder  of  the  period  of  the  lease. 
It  was  expressly  provided,  moreover,  that  the  company  should 
pay  into  the  city  treasury  for  gas  sold  all  receipts  in  excess 
of  the  minimum  prices  just  recited,  after  the  dates  when 
the  councils  could  put  such  prices  into  effect.  The  com¬ 
pany  agreed  to  provide  a  proper  place  for  the  office  of  the 
city  inspector  of  meters,  who  upon  the  complaint  of  a  con¬ 
sumer  might  require  the  company  to  disconnect  any  meter 
and  deliver  it  to  the  inspection  station  for  examination.  It 
was  stipulated  that  any  such  meter  should  be  disconnected 
between  8  o’clock  in  the  morning  and  3  o’clock  in  the  after¬ 
noon  and  within  48  hours  of  the  time  when  the  company 
received  notice  to  disconnect.  The  meter  was  then  to  be 
tested  and  returned  to  the  company  within  24  hours  of  its 
arrival  at  the  testing  station,  bearing  a  seal  with  the  report 
of  the  inspector  as  to  whether  it  was  correct  or  incorrect.  If 
incorrect,  “  the  percentage  which  it  runs  fast  or  slow,  and 
the  bill  of  the  consumer  about  which  the  complaint  has  been 
made  shall  be  corrected  according  to  such  finding  and  report 
of  the  inspector.”  The  company  was  required  to  contribute 
$10,000  a  year  toward  the  salaries  and  expenses  of  the  in¬ 
spector  of  meters  and  his  assistants.  It  was  expressly 
required  that  upon  removal  of  a  meter  for  testing,  the  com¬ 
pany  should  at  its  own  expense  replace  it  by  another  meter. 


572 


MUNICIPAL  FRANCHISES. 


the  object  being  that  no  consumer  should  be  without  light. 
The  type  of  meter  used  was  to  be  “  such  type  as  shall  be  in 
general  use  in  other  large  cities  in  the  United  States.” 

The  city  reserved  the  right  to  enter  upon  and  examine  the 
premises  leased,  to  inspect  them  and  to  test  the  candle-power 
of  the  gas.  The  company  was  not  to  be  liable  in  any  way 
for  any  indebtedness  of  the  city  incurred  on  account  of  the 
gas  works,  but  was,  on  the  other  hand,  expressly  required  to 
assume  and  discharge  all  the  contracts  made  by  the  city 
Bureau  of  Gas  for  the  purchase  of  supplies  which  had  not 
been  delivered  prior  to  the  date  when  the  lease  went  into 
effect.  The  city  was  to  be  indemnified  against  damages 
caused  by  negligence  of  the  company  in  connection  with  its 
operations  under  the  lease.  It  was  also  expressly  stipulated 
that  nothing  in  the  lease  should  be  construed  as  authorizing 
or  consenting  to  the  conduct  of  a  gas  business  in  the  city  by 
the  United  Gas  Improvement  Company  or  its  assigns  after 
the  expiration  of  the  lease. 

The  city  has  not  chosen  to  reduce  the  price  of  gas  below 
$1,  preferring  to  receive  a  substantial  profit  from  the  lease 
of  the  works  at  the  expense  of  the  consumers.  This  profit 
was  approximately  $680,000  for  the  year  1905. 1  During  that 
year  the  company  came  forward  with  a  proposition  for  the 
modification  of  the  lease.  According  to  this  proposal,  the 
term  of  the  lease  was  to  be  extended  unconditionally  until 
the  year  1980.2  The  city  was  to  give  up  the  right  to  receive 
an  annual  payment  in  lieu  of  the  reduction  of  rates,  and 
in  place  of  it  was  to  get  $25,000,000  in  cash,  payable  in  in¬ 
stallments  during  the  years  1905,  1906  and  1907.  The  city 
was  also  to  surrender  the  right  to  lower  the  price  of  gas  and 
rates  were  to  be  definitely  fixed  at  $1  per  1000  cubic  feet 
until  1911;  at  90  cents  from  that  time  until  1930;  at  85 
cents  from  then  until  1956,  and  at  80  cents  for  the  remainder 
of  the  period  until  1980.  This  proposition  was  adopted  by 
both  branches  of  councils,  but  raised  such  a  storm  of  protest 
from  the  citizens  of  Philadelphia  that  the  legislative  body 
did  not  dare  to  pass  it  over  the  mayor’s  veto. 

254.  City  may  buy  hack  exclusive  franchise  at  end  of  forty 
years  —  Minneapolis. — By  an  ordinance  approved  February 

1  National  Civic  Federation  Report,  op.  cit.,  pt.  2,  vol.  1,  p.  650. 

*  “  A  Review  of  the  Gas  Situation  in  Philadelphia,”  issued  by  the  Committee  of 
Seventy,  June,  1905. 


ARTIFICIAL  GAS  FRANCHISES. 


573 


24,  1870,  the  City  of  Minneapolis  gave  to  certain  individuals 
and  their  assigns  the  exclusive  privilege  of  manufactur¬ 
ing  and  selling  gas  within  the  city  limits  for  a  period 
of  forty  years.1  This  grant  included  the  right  to  lay  pipes 
in  the  streets  and  to  adopt  any  other  means  necessary  for 
furnishing  gas  to  the  inhabitants  of  the  city.  It  was  pro¬ 
vided,  however,  that  the  grant  should  not  interfere  with  the 
right  of  private  individuals  to  manufacture  gas  for  lighting 
their  own  premises.  In  case  the  city  should  be  unable  to 
agree  with  the  grantees  as  to  the  price  to  be  charged  for  gas 
the  question  was  to  be  left  to  arbitration.  It  was  also  stipu¬ 
lated  that  gas  should  be  furnished  for  city  purposes  “  at  rates 
not  exceeding  those  charged  by  companies  in  neighboring 
cities,  regard  being  had  to  freight  and  charges  for  material 
for  manufacturing  gas.”  The  gas  manufactory,  real  estate, 
all  pipes  and  coal  and  other  materials  used  by  the  grantees 
in  the  business  of  manufacturing  gas  were  exempted  from 
municipal  taxation  for  a  period  of  three  years.  The  ordi¬ 
nance  provided  that  at  the  expiration  of  forty  years  the  city 
should  have  the  right  to  purchase  the  franchise  pertaining  to 
its  territory  and  the  gas  pipes,  works,  fixtures  and  other 
property  pertaining  to  the  business  at  their  actual  value,  to 
be  fixed  by  arbitration.  If,  however,  the  city  should  decline 
to  purchase  at  the  valuation  so  fixed,  the  rights,  franchises 
and  privileges  of  the  grantees  were  to  continue  twenty  years 
longer. 

It  is  to  be  noted  that  the  territory  covered  by  the  city  at 
the  time  this  franchise  was  granted  lay  exclusively  on  the 
west  side  of  the  Mississippi  River.  On  the  other  side  of  the 
river  the  city  of  St.  Anthony,  now  a  part  of  Minneapolis,  on 
December  5,  1871,  granted  an  exclusive  gas  franchise  for 
fifty  years  to  certan  other  individuals.2  The  terms  of  the 
St.  Anthony  franchise,  including  the  purchase  clause,  were 
practically  identical  with  the  terms  of  the  Minneapolis  fran¬ 
chise,  with  the  exception  that  the  original  grant  was  for  fifty 
years  instead  of  forty,  and  the  renewal  period  in  case  the  city 
failed  to  purchase  was  for  twenty-five  years  instead  of  twenty. 
At  the  time  these  franchises  were  granted  Minneapolis  was 
little  more  than  a  village.  At  the  expiration  in  1910  of  the 

1  Charter ,  Ordinances,  etc.,  op.  cit.,  p.  584. 

a  Ibid.,  p.  586. 


574 


MUNICIPAL  FRANCHISES. 


period  for  which  the  original  franchise  was  granted,  the  city 
will  probably  have  a  population  of  more  than  300,000  people, 
and  will  at  that  time  have  the  extraordinary  privilege  of  buy¬ 
ing  back  from  the  company  at  its  actual  value  not  only  the 
gas  plant  and  its  appurtenances,  but  also  the  exclusive  privi¬ 
lege  of  furnishing  gas  in  a  great  and  rapidly  growing  city,  a 
privilege  that  if  not  purchased  will  be  good  for  at  least  twenty 
years  more. 

In  1894  in  the  exercise  of  its  general  powers,  the  city  of 
Minneapolis  passed  an  ordinance  providing  for  the  appoint¬ 
ment  of  an  inspector  of  gas  and  prescribing  rules  and  regu¬ 
lations  for  the  manufacture,  measurement  and  quality  of  gas 
supplied  to  consumers  in  the  city.1  The  gas  inspector  under 
this  ordinance  was  to  be  a  suitable  person  recommended  to 
the  city  council  as  competent  to  test  gas  meters  and  the 
quality,  purity  and  illuminating  power  of  gas.  An  examin¬ 
ing  board  was  established  to  consist  of  the  Professor  of 
Chemistry  and  the  Professor  of  Physics  in  the  Minnesota 
State  University  and  the  Principal  of  the  Minneapolis  Central 
High  School.  This  board  was  to  hold  an  examination  every 
two  years  of  all  persons  applying  for  the  position  of  gas  in¬ 
spector.  After  the  examination,  the  board  was  to  certify  to 
the  city  council  the  names  of  such  persons  who  had  taken  the 
examination  as  the  members  of  the  board  should  deem  fully 
competent  to  make  the  tests  required.  Only  persons  certified 
by  the  board  were  to  be  eligible  to  appointment,  except  that 
the  person  first  appointed  as  inspector  of  gas  should  be  eli¬ 
gible  to  re-appointment  without  being  certified  again.  Under 
this  ordinance  any  consumer  of  gas  was  to  have  the  right,  on 
the  payment  of  a  fee  of  $1,  to  have  his  meter  tested.  Three 
tests  were  to  be  made  by  the  inspector : 

First,  to  prove  accurately  the  registration  of  the  meter. 

Second,  to  prove  the  steadiness  of  the  light  and  the  freedom 
of  the  meter  from  leakage, 

Third,  to  prove  that  the  meter  registered  small  quantities 
of  gas. 

If  the  meter  was  found  to  register  inaccurately  to  the  in¬ 
jury  of  the  consumer  to  an  extent  exceeding  2  per  cent,  the 
fee  of  $1  was  to  be  refunded  and  the  meter  readjusted.  It 


1  Charter ,  Ordinances ,  etc.,  op.  cit p.  586. 


ARTIFICIAL  GAS  FRANCHISES. 


575 


was  stipulated  that  if  the  company  should  at  any  time  furnish 
an  all-coal  gas,  the  quality  required  should  be  18  candle- 
power  under  pressure  of  not  more  than  six-tenths  of  an  inch. 
Other  gas  was  to  have  a  quality  of  25  candlepower  at  a 
pressure  of  not  more  than  eleven-tenths  inches.  These  stand¬ 
ards  were  to  apply  to  a  “  lava-tipped,  fish-tail  or  bats-winged 
burner  ”  consuming  five  cubic  feet  per  hour.  The  illumi¬ 
nating  quality  specified  was  required  at  the  point  where  gas 
leaves  the  holder.  It  was  required  that  in  all  tests  other 
than  at  the  holder  the  proper  corrections  should  be  made  for 
the  depreciation  of  the  illuminating  power  of  the  gas  in 
passing  from  the  holder  to  the  point  where  the  test  was  being 
made,  but  the  company  was  required  to  adjust  its  distribut¬ 
ing  mains  so  that  the  illuminating  power  of  the  gas  within 
a  radius  of  one  and  one-half  miles  from  the  works  should 
be  at  least  92  per  cent  of  the  illuminating  power  of  the  gas 
as  it  leaves  the  holder.  It  was  provided  that  the  gas  should 
not  contain  more  than  twenty  grains  of  sulphur  in  any  form 
or  more  than  five  grains  of  ammonia  in  any  form  in  100 
cubic  feet,  and  that  it  should  “  be  free  of  the  impurity  known 
as  sulphurated  hydrogen,  said  impurity  to  be  determined  by 
passing  the  gas  through  a  glass  vessel  containing  strips  of 
bibulous  paper  moistened  with  a  solution  of  the  acetate  of 
lead,  and  if  any  discoloration  of  the  test  paper  is  found  to 
have  taken  place  this  is  to  be  held  conclusive  as  to  the  pres¬ 
ence  of  sulphurated  hydrogen  in  the  gas.”  The  company 
was  required  so  to  adjust  and  complete  its  system  of  holders 
and  mains  that  the  gas  should  be  distributed  throughout  the 
entire  system  of  gas  mains  in  the  city  at  a  proper  and 
reasonable  pressure  subject  to  the  approval  of  the  gas  in¬ 
spector.  It  was  provided  that  for  all-coal  gas  furnished  of 
quality  inferior  to  18  candlepower  the  company  should  for¬ 
feit  to  the  city  a  sum  equal  to  one-fifteenth  of  its  aggregate 
charges  to  consumers  for  each  candlepower  that  the  gas  had 
less  than  the  standard.  In  case  of  other  gas,  the  forfeit  was 
to  be  one-twentieth  of  the  regular  charge,  for  each  candle- 
power  less  than  the  standard.  These  forfeits,  however,  were 
not  to  be  required  in  case  the  company  gave  rebates  to  its 
consumers  of  one-eighteenth  and  one-twenty-fifth  respectively 
for  each  candlepower  of  the  coal  gas  or  other  gas  furnished 
below  the  standards. 


576 


MUNICIPAL  FRANCHISES. 


255*  Rates  to  be  fixed  by  courts  if  council  rates  are  un¬ 
reasonable — St-  Paul. — In  the  year  1900  the  new  St.  Paul 
charter  went  into  effect  with  provisions  that  every  franchise 
granted  by  the  city  must  provide  for  the  payment  of  at  least 
5  per  cent  of  the  gross  receipts  of  the  grantee  into  the  city 
treasury;  that  no  exclusive  franchise  could  be  granted;  that 
no  franchise  could  be  granted  for  more  than  twenty-five  years, 
and  that  every  franchise-holder  should  make  an  annual  re¬ 
port  to  the  city  showing  in  detail  the  financial  status  of  his 
business  for  the  preceding  year.  There  was  also  a  provision 
to  the  effect  that  the  city  council  should  not  grant  any  ex¬ 
tensions  of  any  kind  to  existing  franchise  companies  except 
on  their  written  agreement  to  exercise  the  franchises  they 
already  had  under  the  terms  and  conditions  of  the  charter. 

By  an  ordinance  passed  January  21,  1904,  the  St.  Paul 
Gas  Light  Company  was  given  a  franchise  for  a  period  of 
twenty-five  years  from  January  1,  1907,  to  supply  gas  for  all 
purposes.1  The  company  was  required  within  one  year  after 
accepting  the  franchise  to  prepare  “  in  convenient  book  or 
atlas  form  substantially  bound  *  *  *  a  profile  show¬ 

ing  all  the  main  pipes,  tunnels  and  conduits  then  laid  and 
constructed,  with  their  dimensions  and  locations,”  to  be  filed 
with  the  commissioner  of  public  works.  This  profile  was  to 
be  made  complete  by  the  company,  as  to  extensions  and  new 
construction,  in  the  month  of  January  of  each  year.  It  was 
expressly  stipulated  that  the  company  should  be  bound  by 
the  requirements  of  the  city  charter  in  regard  to  franchises, 
including  the  payment  of  an  annual  license  fee  of  5  per  cent 
of  its  gross  earnings  derived  or  accruing  from  the  exercise 
of  its  franchise,  and  “  all  manner  of  business  transacted 
thereunder,  including  the  sale  and  disposal  of  all  residuals.” 
It  was  provided,  however,  that  the  gross  receipts  tax  should 
not  apply  to  earnings  derived  from  the  sale  of  gas  stoves, 
gas  fixtures  and  appliances.  It  was  agreed  that  after  Janu¬ 
ary  1,  1907,  the  company  should  be  held  to  derive  from  this 
ordinance  and  from  the  present  charter  of  the  city  its  sole 
and  only  right  to  occupy  the  streets  of  the  city  for  its  gas 
business.  The  net  price  of  gas  to  private  consumers  was 
fixed  at  $1.15  per  1,000  cubic  feet  until  December  31,  1904; 
at  $1.10  for  the  year  1905;  at  $1.05  for  the  year  1906,  and 

1  Ordinances ,  1907,  op.  cit.,  p.  568. 


ARTIFICIAL  GAS  FRANCHISES. 


577 


at  a  maximum  net  rate  of  $1.00  for  the  twenty-five  years 
commencing  January  1,  1907.  The  company,  however,  was 
authorized  to  add  20  cents  to  the  net  price  on  failure  of  the 
consumer  to  pay  his  bill  for  any  month  on  or  before  the  15th 
of  the  succeeding  month.  It  was  also  provided  that  the  com¬ 
pany  might  make  a  minimum  charge  of  25  cents  per  month 
even  though  the  amount  of  gas  consumed  at  the  price  fixed 
would  figure  out  a  less  sum.  Gas  for  lighting  the  streets  and 
the  public  buildings  of  the  City  of  St.  Paul  and  the  County  of 
Pamsey  was  to  be  furnished  at  a  price  that  would  never 
exceed  $1.00  per  1,000  cubic  feet  for  the  gas  actually  con¬ 
sumed.  The  gas  furnished  was  to  be  “  good  and  first  class 
for  illuminating  purposes,  free  from  all  noxious  impurities.” 
If  the  company  furnished  all  coal  gas,  it  was  to  be  of  not 
less  than  16  candlepower;  if  water  gas,  it  was  to  be  not  less 
than  22  candlepower.  The  standard  was  to  apply  in  either 
case  within  a  radius  of  one  and  one-half  miles  from  the  com¬ 
pany’s  holders.  The  company  was  required  to  furnish  to  all 
persons  along  its  mains  “  without  discrimination,  an  ample 
and  adequate  supply  of  gas  for  illumination,  fuel  or  other 
proper  purpose,  at  current  prices  ”  under  reasonable  rules 
and  regulations  adopted  by  the  company.  The  company  was 
required  during  the  life  of  the  franchise  to  bid  in  good  faith 
for  the  public  lighting  contracts  at  prices  not  in  excess  of 
the  current  rates.  In  case  there  should  be  an  emergency 
when  the  city  had  no  contract  for  furnishing  public  lighting, 
or  in  case  the  city  was  deprived  of  light  for  any  other  reason, 
the  company  agreed  to  make  temporary  provision  for  light¬ 
ing  at  the  request  of  the  city.  It  w*as  stipulated  that  if  the 
city  should  acquire,  construct  or  authorize  the  construction 
of  a  system  of  conduits,  tunnels  or  subways  in  any  under¬ 
street  or  streets,  it  might  order  the  company  to  remove  its 
pipes  to  such  subways  at  the  company’s  expense.  Moreover, 
the  city  reserved  the  right  to  charge  the  company  a  reason¬ 
able  rental  to  be  fixed  by  the  common  council  for  the  use  of 
any  such  subways. 

It  was  provided  that  the  common  council  should  have 
authority,  “  independent  of  whether  or  not  the  present  pro¬ 
visions  of  the  city  charter  in  that  behalf  are  continued  in 
force  during  the  life  of  this  franchise,”  to  regulate  the  maxi¬ 
mum  prices  to  be  charged  by  the  company,  subject  only  to 


578 


MUNICIPAL  FRANCHISES. 


the  provision  that  the  prices  fixed  by  the  city  should  be  fair 
and  reasonable.  It  was  stipulated  that  if  the  company  should 
ever  dispute  the  fairness  and  reasonableness  of  any  maximum 
prices  thereafter  prescribed  by  the  council,  and  should  carry 
the  question  for  litigation  into  any  court  of  competent  juris¬ 
diction,  and  if  such  court  should  determine  that  the  prices 
fixed  by  the  city  were  not  fair  and  reasonable,  then  in  the 
same  action  upon  the  evidence  adduced,  the  court  should 
itself  “  decide,  fix  and  determine  what  maximum  prices  are 
fair  and  reasonable.”  The  prices  so  fixed  by  the  court  were 
to  be  binding  upon  the  company  until  the  city  should  take 
further  action  in  the  matter,  or  until  the  conditions  bearing 
upon  the  fairness  and  reasonableness  of  such  prices  should 
have  materially  changed  and  the  company  should  have  again 
brought  the  question  into  litigation.  It  was  stipulated,  how¬ 
ever,  that  the  court  should  never  fix  a  maximum  price  for 
gas  in  excess  of  $1  per  1,000  cubic  feet. 

The  company  agreed  to  extend  its  mains  within  one  year 
along  certain  enumerated  streets.  It  also  agreed  that  after 
January  1,  1907,  it  would  extend  its  mains  along  any  street 
in  the  city  and  furnish  an  ample  supply  of  gas  to  residents 
on  such  street  within  six  months  after  receiving  the  petition 
of  the  residents  requesting  the  extension  and  agreeing  that 
they  would  become  “  regular  customers  and  consumers  of 
gas  ”  along  the  line  of  the  extension.  But  it  was  required 
that  the  petitioners  should  be  sufficient  in  number  to  average 
at  least  one  house  or  building  to  be  supplied  with  gas  for 
every  100  feet  of  new  main  to  be  laid,  not  including  street 
crossings.  The  company,  however,  was  not  to  be  required  to 
lay  any  mains  or  erect  any  lamp-posts  during  the  months  of 
December,  January,  February,  March  and  April.  In  addi¬ 
tion  to  extensions  made  under  the  conditions  just  described, 
the  common  council  was  given  unconditional  authority  to 
require  extensions  to  the  amount  of  three  miles  of  mains  in 
any  one  calendar  year;  and  also,  whenever  the  company  was 
under  contract  for  public  lighting,  to  require  the  erection 
and  maintenance  by  the  company  of  additional  iron  lamp- 
posts  with  the  necessary  connections  and  service  pipes  for 
the  purpose  of  such  lighting. 

The  company  was  expressly  forbidden  to  request  any  de¬ 
posit  or  advance  payment  for  installing  service  “  in  excess  of 


ARTIFICIAL  GAS  FRANCHISES. 


579 


what  is  reasonably  necessary  to  secure  payment  of  current 
bills  for  gas  consumed.”  On  deposits  for  this  purpose,  the 
company  was  required  to  pay  annual  interest  at  the  rate  of 
5  per  cent.  It  was  also  stipulated  that  if  current  monthly 
bills  should  not  be  paid  as  due  by  customers,  the  service 
might  be  discontinued  until  the  bills  were  paid,  but  that  un¬ 
paid  bills  unless  due  from  the  owner  should  not  be  charged 
against  the  property,  and  no  person  not  himself  in  arrears, 
should  be  denied  service  because  any  previous  occupant  of  the 
premises  happened  to  be  in  arrears  with  the  company.  Any 
sale,  assignment  or  lease  of  the  franchise  was  forbidden  ex¬ 
cept  by  consent  of  the  city  evidenced  by  a  two-thirds  vote  of 
the  common  council.  This  prohibition,  however,  was  not  to 
apply  to  any  mortgage  or  deed  of  trust.  The  company  was 
required  to  remain  separate  and  apart  from,  and  entirely 
independent  of,  all  competing  companies  that  might  there¬ 
after  be  engaged  in  the  gas  business  in  St.  Paul.  The  com¬ 
pany  was  forbidden  in  any  manner  to  consolidate  or  pool  its 
stock  or  business,  or  make  any  division  of  business  or  terri¬ 
tory  with  any  other  company,  or  to  acquire  or  use  in  any  way 
the  franchises  or  property  of  any  other  local  gas  company 
without  the  council’s  consent. 

It  should  be  noted  that  the  St.  Paul  Gas  Light  Company 
also  does  the  principal  electric  business  in  St.  Paul.  As  a 
condition  of  this  new  gas  franchise,  the  company  was  required 
to  agree  that  all  the  electricity  franchises  held  or  controlled 
by  it  should  be  exercised  subject  to  the  terms  and  conditions 
of  the  city  charter.  The  city  agreed  to  recognize  these  fran¬ 
chises  as  valid  for  a  period  of  twenty-five  years,  at  the  end 
of  which  time  they  were  definitely  to  expire.  The  company 
had  claimed  that  its  electricity  franchises  were  perpetual, 
while  the  city  had  attempted  by  ordinance  to  terminate  them 
on  January  1,  1907.  Accordingly,  by  a  compromise  reached 
under  the  franchise  ordinance  of  January  21,  1904,  which  we 
have  just  described,  the  company’s  gas  and  electricity  fran¬ 
chises  were  brought  definitely  under  the  terms  of  the  city 
charter  and  limited  by  agreement  to  a  period  of  twenty-five 
years  ending  January  1,  1932. 

256.  Company’s  plant  appraised  in  anticipation  of  pur¬ 
chase—  Des  Moines.— On  May  1G,  1895,  the  City  of  Des 
Moines  passed  an  ordinance  to  fix  the  price  of  illuminating 


580 


MUNICIPAL  FRANCHISES. 


gas  and  to  prescribe  the  conditions  under  which  persons  and 
corporations  dealing  in  illuminating  gas  could  use  the  streets 
of  the  city.1  Gas  companies  were  entitled  under  this  ordi¬ 
nance  to  charge  $1.40  per  1,000  cubic  feet  for  gas  used  for 
illuminating  purposes  and  $1.10  for  gas  used  for  fuel  pur¬ 
poses,  a  discount  of  10  cents  being  allowed  in  either  case  for 
prompt  payment.  Illuminating  gas  was  not  to  be  of  less  than 
24  candlepower;  if  the  candlepower  was  less,  the  rate  of 
charge  was  to  be  proportionately  less.  Gas  for  street  lamps 
was  to  be  furnished  the  city  at  $17  per  annum,  including 
lamp-posts,  service  pipes,  lamps  and  maintenance.  The 
lamps  were  to  be  “  lighted  one-half  hour  after  sunset  and  one 
hour  before  moonset,  and  extinguished  one  hour  before  sun¬ 
rise  and  one  hour  after  moonrise,  except  when  the  condition 
of  the  weather  may  render  street  lights  necessary,  in  which 
event  they  are  to  be  kept  burning  all  night.”  The  lamps 
were  to  be  regulated  to  burn  not  less  than  6  feet  of  gas  per 
hour.  All  gas  companies  were  required  to  file  semi-annual 
statements  with  the  city,  showing  the  amount  of  gas  manu¬ 
factured  and  furnished  to  the  city  or  its  inhabitants  by  them, 
and  the  rate  per  1,000  feet  received  for  such  gas.  Meters 
were  to  be  furnished  by  the  companies  at  their  own  expense. 
Service  pipes  were  to  be  laid  to  the  lot  line  free  and  from  the 
lot  line  to  the  meter  for  not  more  than  15  cents  per  foot.  It 
was  provided  that  any  company  accepting  this  ordinance 
which  already  had  its  service  pipes  in  the  streets  might  con¬ 
tinue  to  occupy  the  streets  and  alleys  of  the  city  for  the  pur¬ 
pose  of  furnishing  illuminating  gas  so  long  as  the  city’s  con¬ 
sent  should  continue.  In  case  any  company  refused  to  fur¬ 
nish  gas  at  the  rates  prescribed  in  this  ordinance,  the  city 
reserved  the  right  to  declare  the  forfeiture  of  all  such  com¬ 
pany’s  rights  and  privileges  already  possessed  or  granted  in 
this  ordinance. 

By  another  ordinance  passed  February  7,  1896,  the  ordi¬ 
nance  just  described  was  amended  and  modified  as  respected 
the  Capital  City  Gas  Company.2  By  the  amended  ordinance 
this  company  was  authorized  to  charge  during  the  years 
1896  and  1897  a  net  rate  of  $1.30  per  1,000  feet;  during  the 
years  1898  and  1899  a  net  rate  of  $1.25;  during  the  years 
1900  and  1901  a  net  rate  of  $1.20;  during  the  years  1902, 

1  Ordinance  No.  724.  *  Ordinance  No.  751. 


ARTIFICIAL  GAS  FRANCHISES. 


581 


1903  and  1904  a  net  rate  of  $1.15;  during  1905  a  net  rate 
of  $1.10,  and  during  the  succeeding  five  years  a  net  rate  of 
$1.  The  company  was  authorized,  however,  to  add  10  cents 
per  1,000  cubic  feet  to  each  of  these  rates  in  case  payment 
for  gas  was  delayed  beyond  the  fifteenth  day  of  the  month  fol¬ 
lowing  that  in  which  the  gas  was  used.  For  street  lamps  and 
the  gas  consumed  by  them  the  city  agreed  to  pay  $18  each  per 
year  until  the  number  of  lamps  reached  500.  After  that  the 
price  was  to  be  $17.  The  city’s  gas  bills  were  to  be  paid 
monthly,  and  five-foot  burners  or  their  equivalent  in  illuminat¬ 
ing  power  were  to  be  used.  The  gas  was  to  be  of  not  less  than 
22  candlepower. 

The  city  reserved  the  right  to  purchase  the  company’s 
plant  at  any  time  after  five  years  and  within  fifteen  years 
from  January  1,  1896.  This  right  to  purchase  was  to  vest 
in  the  city  in  its  corporate  capacity  or  in  the  city’s  trustees, 
or  in  the  city  in  any  other  manner  by  which  the  privilege 
of  purchase  by  the  city  might  be  exercised  in  good  faith. 
The  value  of  the  company’s  plant  at  the  time  this  ordinance 
was  passed  was  to  be  determined  by  three  appraisers,  who 
were  to  make  a  complete  inventory  and  appraisal  of  the 
company’s  property.  The  company  was  required  to  file  with 
the  city  annually  a  statement,  in  complete  detail,  of  expen¬ 
ditures  for  betterments  and  repairs,  and  the  city  was  to  have 
full  facilities  for  verification  of  these  reports  by  experts  of 
its  own  selection.  It  was  stipulated  that  replacements  and 
ordinary  repairs  should  not  be  counted  as  betterments,  but 
that  in  the  event  of  the  purchase  of  the  plant  by  the  city,  the 
actual  cost  of  the  betterments  should  be  added  to  the  first 
appraisement,  “  and  no  more.”  It  was  stipulated  that  the 
provisions  of  this  amendment  to  the  ordinance  of  1895  should 
not  be  construed  as  either  confirming,  recognizing  or  denying 
franchise  or  other  rights  claimed  by  the  company,  and  that 
the  privilege  granted  by  the  amendment  should  absolutely 
cease  at  the  end  of  fifteen  years.  It  was  also  stipulated  that 
the  amendment  should  not  be  construed  as  conferring  upon 
the  company  an  exclusive  right  for  any  period  of  time  to 
furnish  gas  either  to  the  city  or  to  private  consumers,  or  as 
limiting  the  authority  of  the  city  to  purchase  or  construct 
gas  or  electric  light  works  for  the  purpose  of  lighting  the 
streets  and  supplying  the  city  and  its  citizens  with  light,  fuel 


582 


MUNICIPAL  FRANCHISES. 


or  power.  As  a  condition  of  this  franchise,  the  company  was 
to  dismiss  its  suit  against  the  city  then  pending  in  the  United 
States  Circuit  Court  and  was  to  pay  the  city  two  per  cent  of 
its  gross  receipts,  semi-annually  after  January  1,  1896.  If 
the  company  at  any  time  reduced  the  price  of  gas  to  its 
patrons  below  the  rate  fixed  by  the  ordinance,  it  was  pro¬ 
hibited  during  the  entire  period  of  the  grant  “  from  charg¬ 
ing  any  person  or  persons  or  patrons  of  said  company  for 
gas,  a  price  in  excess  of  that  which  said  company  has  charged 
any  other  person.”  It  was  provided,  however,  that  this  clause 
should  not  be  construed  to  prohibit  special  contracts  for  lower 
rates  to  large  consumers.  The  amendment  was  not  to  go 
into  effect  until  accepted  by  the  company. 

257.  Price  of  gas  to  he  regulated  at  intervals— Saginaw. 
— The  City  of  Saginaw,  Mich.,  includes  two  districts  which 
until  a  few  years  ago  constituted  separate  cities.  In  East 
Saginaw  a  new  franchise  was  granted  January  25,  1886,  to  a 
reorganized  gas  company.1  Under  this  franchise  the  com¬ 
pany  was  required  to  furnish  to  the  city  and  its  inhabitants 
“  such  quantity  of  gas  as  may  be  required,  equal  in  quality, 
and  not  exceeding  in  average  price,  the  gas  furnished  in 
cities  of  like  population  in  the  State,  similarly  situated  as 
to  cost  of  manufacture  and  supply  thereof,  the  price  in  no 
event  to  exceed  $2.50  per  1,000  cubic  feet  for  the  first  five 
years  of  the  corporate  existence.”  Moreover,  the  common 
council  was  authorized  at  the  expiration  of  the  first  five-year 
period,  and  every  five  years  thereafter,  by  resolution  or  ordi¬ 
nance  to  change  and  again  fix  the  price  of  gas  “  subject  only 
to  the  condition  that  the  same  shall  not  be  reduced  below  the 
price  charged  for  gas  in  other  cities  of  the  State  similarly 
situated  with  reference  to  the  cost  of  manufacturing  and 
supplying  the  same.”  For  failure  to  supply  gas  or  keep  the 
gas  works  and  fixtures  in  good  order  for  a  period  of  three 
months  the  franchise  was  to  be  deemed  forfeited  and  the  city 
council  was  to  have  the  right  to  confer  it  upon  any  other 
person  or  corporation.  Previous  to  the  opening  of  any  im¬ 
proved  streets  or  alleys  for  the  purpose  of  laying,  relaying 
or  repairing  any  main  or  service  pipe  the  company  was  to 
give  the  board  of  public  works  at  least  twenty-four  hours’ 
notice,  and,  in  making  such  openings,  to  obey  the  reasonable 

1  Compiled  Ordinances,  City  of  Saginaw,  1898,  p.  92. 


ARTIFICIAL  GAS  FRANCHISES. 


583 


directions  of  the  board  as  to  guarding  the  excavations  so  as 
to  prevent  accidents,  and  within  a  reasonable  time  was  to 
close  the  openings  and  repair  the  street.  The  company  was 
also  to  be  liable  for  all  damages  to  persons  or  property  re¬ 
sulting  from  its  neglect  properly  to  make  or  guard  such  ex¬ 
cavations.  Whenever  the  city  determined  to  grade  or  pave  a 
street,  notice  was  to  be  served  upon  the  officers  of  the  com¬ 
pany  residing  in  the  city.  Within  ninety  days  after  the  serv¬ 
ice  of  such  notice,  the  company  was  to  enter  upon  the  street 
and  complete  the  laying  and  extending  of  its  mains  and  serv¬ 
ice  pipes  in  the  portion  ordered  paved,  and  within  the  same 
period  was  to  relay  or  repair  any  existing  pipe  or  pipes  located 
within  the  limits  of  the  contemplated  improvement,  so  far  as. 
they  might  require  relaying  or  repairing.  It  was  provided, 
however,  that  when  a  street  improvement  was  ordered  at  any 
time  between  November  1  and  April  1,  the  time  within  which 
the  company  was  to  do  the  work  should  be  a  period  of  sixty 
days  from  April  1  following  the  receipt  of  notice  from  the 
cit}u  In  case  the  company  neglected  or  refused  to  extend  its 
pipes  or  repair  existing  pipes  in  advance  of  the  contemplated 
street  improvement,  it  was  to  have  no  right  thereafter  with¬ 
out  special  consent  of  the  common  council  to  enter  upon  any 
street  so  improved  for  the  purpose  of  laying  its  pipes  within 
the  lines  of  the  pavement,  but  must  lay  its  pipes  outside  of 
the  curb  line  unless  the  common  council  should  direct  other¬ 
wise  for  good  cause  shown,  and  furthermore  the  company  was 
to  have  no  right  to  relay  or  repair  its  existing  pipes  under 
these  circumstances  without  the  consent  of  the  common  coun¬ 
cil  unless  it  appeared  to  the  satisfaction  of  that  body  that  the 
necessity  of  relaying  or  repairing  pipes  arose  after  the  ex¬ 
piration  of  the  period  within  which,  under  the  provisions  of 
the  ordinance,  the  company  should  have  attended  to  the  mat¬ 
ter,  or  that  such  necessity  had  not  been  discovered  by  the 
company  within  that  period.  In  such  cases,  the  company 
was  to  have  the  right  to  open  the  pavement  for  the  purpose 
of  relaying  or  repairing  its  pipes  subject  to  the  supervision 
of  the  commissioner  of  streets,  but  was  required  to  restore 
the  pavement  to  as  good  a  condition  as  it  was  in  before  being 
disturbed.  Whenever  the  company  desired  to  lay  service 
pipes  to  connect  with  its  mains  in  paved  streets  it  was  to  do 
so  by  tunnelling  wherever  practicable  without  disturbance  of 


584 


MUNICIPAL  FRANCHISES. 


the  pavement.  In  case,  however,  the  removal  of  the  pave¬ 
ment  was  necessary,  the  company  was  required  to  get  special 
permission  for  the  work  from  the  common  council,  as  pro¬ 
vided  in  the  general  ordinance  regulating  sewer,  gas  and 
water  connections  in  paved  streets. 

The  gas  franchise  for  the  western  district  of  Saginaw  was 
granted  originally  on  April  22,  1868,  and  amended  July  16, 
1894.1  This  franchise  was  granted  to  individuals,  was  ex¬ 
clusive  in  its  terms  and  extended  to  all  the  streets  of  the 
city  and  to  all  territory  that  might  thereafter  be  annexed  to 
the  city.  The  grantees  were  required  to  organize  a  corpora¬ 
tion  under  the  laws  of  Michigan  and  within  eighteen  months 
to  erect  good,  permanent  and  sufficient  gas  works  in  the  city 
and  lay  down  at  least  9,000  feet  of  mains  in  the  streets.  The 
company  was  to  furnish  gas  to  all  persons  along  the  line  of 
its  mains  “  who  shall  suitably  supply  their  premises  with 
service  pipe  and  fixtures  for  receiving  and  burning  gas,  and 
who  shall  sign  the  rules  and  regulations  of  said  gas  company 
(such  as  are  usual  with  such  companies)  and  who  shall  re¬ 
quire  gas  and  pay  for  the  same  at  a  rate  not  exceeding,  ex¬ 
clusive  of  a  reasonable  rent  for  meters,  four  dollars  per  1,000 
cubic  feet  for  private  lights.”  The  maximum  rate  to  the 
city  for  public  lamps  was  to  be  $3.50  per  1,000  feet.  It  was 
also  provided  that  after  the  expiration  of  the  eighteen 
months,  “as  other  parts  of  the  city  may  become  more  com¬ 
pactly  built  so  as  to  afford  responsible  applicants  as  con¬ 
sumers  of  gas  in  fifteen  different  buildings,  who  shall  agree 
to  take  and  continue  to  use  and  pay  for  gas  lights  therein  on 
foregoing  terms  and  conditions,  for  each  additional  1,000 
feet  of  main  pipe,”  the  company  was  to  make  the  required 
extensions  on  demand.  It  was  stipulated  that  the  office  of 
the  company  should  be  in  the  City  of  Saginaw,  and  that  one 
or  more  of  the  company’s  directors  should  reside  there.  It 
was  provided  that  if  the  company  should  not  comply  with  the 
conditions  of  this  franchise,  or  should  at  any  time  fail  to 
keep  its  works  in  good  repair,  or  fail  to  supply  the  city  or  its 
inhabitants  with  the  requisite  quantity  of  gas  “of  as  good 
•quality  as  is  furnished  by  other  companies  to  cities  similarly 
situated  ”  the  franchise  should  be  forfeited.  It  was  pro¬ 
vided  that  the  quality  of  the  gas  should  be  subject  to  inspec- 

1  Compiled  Ordinances,  op.  cit .,  p.  96. 


ARTIFICIAL  GAS  FRANCHISES. 


585 


tion  by  three  competent  persons,  one  appointed  by  the  com¬ 
mon  council,  one  by  the  company,  and  the  third  by  these  two. 
It  was  provided  that  at  the  end  of  ten  years  and  at  the  end 
of  every  five  years  thereafter  the  price  of  gas  should  be  fixed 
for  the  ensuing  five-year  period  at  the  request  of  the  common 
council  by  five  disinterested  persons  who  in  making  their 
decision  were  to  be  governed  “  by  the  price  of  gas  in  neigh¬ 
boring  cities  similarly  situated  with  regard  to  the  cost  of 
production.”  The  written  decision  of  the  majority  of  the 
arbitrators  was  to  be  final.  At  the  end  of  thirty  years,  the 
city  was  required  to  renew  the  franchise  “  for  a  like  term  of 
time,”  or  else  purchase  the  plant  at  an  appraised  valuation. 
By  an  amendment  of  1894  the  provisions  of  the  East  Sagi¬ 
naw  ordinance  relating  to  the  laying  of  pipes  in  advance  of 
the  improvement  of  streets  were  incorporated  in  this 
ordinance. 

On  December  21,  1908,  the  common  council  of  Saginaw 
granted  a  new  thirty-year  franchise  covering  both  districts 
of  the  city  to  the  Saginaw  City  Gas  Company.  Under  this 
franchise  the  price  of  gas  for  two  years  and  five  months 
following  December  31,  1908,  was  to  be  $1.15;  for  the  next 
ten  years  $1.10;  and  for  the  remainder  of  the  franchise 
period  the  price  was  to  be  as  fixed  by  arbitration.  Within 
sixty  days  prior  to  June  1,  1921,  either  party  was  to  have  the 
right  to  institute  arbitration  proceedings  to  determine  the 
price  of  gas  for  the  next  ten  years.  The  arbitration  was  to  be 
conducted  by  five  disinterested  persons,  two  of  whom  should 
be  chosen  by  the  city,  two  by  the  company  and  the  fifth  by 
these  four.  The  price  fixed  by  these  arbitrators  was  to  be 
redetermined  in  like  manner  after  the  expiration  of  another 
period  of  ten  years.  It  was  provided,  however,  that  at  all 
times  a  discount  of  20  cents  per  1,000  feet  should  be  allowed 
from  the  established  rate  in  the  case  of  consumers  paying  or 
offering  to  pay  their  bills  “  at  any  time  during  the  first  twenty 
days  of  the  month  following  that  in  which  the  gas  is  used.” 
The  company  was  authorized  to  charge  a  lower  rate  than  the 
one  fixed  in  the  ordinance  on  condition  that  any  such  rate 
should  be  “  open  to  all  like  consumers  using  gas  for  the  same 
purposes  and  in  like  quantities.”  The  company  was  required 
to  render  a  bill  to  each  consumer  by  the  fifteenth  day  of  each 
month  for  the  gas  used  during  the  preceding  month,  and  it 


586 


MUNICIPAL  FRANCHISES. 


was  stipulated  that  this  bill  should  state  “  the  last  previous 
and  present  index  of  the  meter,  the  number  of  feet  of  gas 
used  by  such  consumer  during  such  month,  the  amount  due 
the  grantee  at  the  prices  hereinbefore  specified  or  hereafter 
fixed,  and  the  discount  to  which  the  consumer  is  entitled  if 
paid  before  the  twentieth  day  of  the  month.”  In  case  of  re¬ 
fusal  or  neglect  on  the  part  of  any  consumer  to  pay  for  gas. 
used  by  him,  the  company  was  authorized  to  cut  off  the  supply 
from  the  premises  so  long  as  they  were  owned  or  occupied  by 
the  person  in  arrears.  The  company  agreed  to  extend  its. 
mains  when  directed  by  the  common  council  to  do  so,  so  as  to 
supply  gas  in  any  case  where  prospective  consumers  to  the- 
number  of  one  for  each  100  feet  of  main  required  should, 
petition  for  an  extension  and  agree  to  use  gas  for  the  period 
of  one  year.  Coal  gas  furnished  by  the  company  was  to  have 
a  heat  value  of  at  least  570  British  Thermal  Units  and  an 
illuminating  value  of  at  least  16  candlepower.  Water  gas 
was  to  have  the  same  heat  value  and  an  illuminating  value 
of  20  candlepower.  If  the  two  kinds  of  gas  were  mixed,  the 
standard  in  each  case  was  to  be  the  same  as  for  coal  gas  alone. 
Pressure  in  the  gas  pipes  at  the  consumers’  meters  was 
limited  to  a  maximum  of  four  and  five-tenths  inches  and  a 
minimum  of  one  and  eight-tenths  inches.  Provisions  similar 
to  those  in  preceding  Saginaw  franchises  relative  to  the  lay- 
ing  of  mains  and  service  pipes  in  advance  of  paving  were  in¬ 
cluded  in  this  grant.  There  was  also  a  rather  elaborate  pro¬ 
vision  for  the  inspection  of  meters.  It  was  provided  that  if 
the  meter  upon  being  tested  was  found  to  register  more  than 
two  per  cent  fast,  the  cost  of  the  inspection  should  be  borne 
by  the  company.  In  case,  however,  the  meter  was  found  to 
be  correct  within  two  per  cent  or  to  be  more  than  two  per 
cent  slow,  the  city  was  to  pay  the  company  fifty  cents  “  to 
cover  the  cost  of  producing  the  meter  at  the  place  of  inspec¬ 
tion.”  In  case  the  meter  was  found  to  be  fast  the  company 
was  to  repay  the  consumer  “  a  sum  equal  to  the  per  cent  fast 
multiplied  by  one-half  the  amount  of  all  bills  paid  by  such 
consumer  for  gas  registered  by  such  meter  between  the  date 
of  the  removal  of  such  meter  for  such  testing  and  one  year 
or  such  part  thereof  as  the  meter  may  have  been  in  use  imme¬ 
diately  preceding  the  date  of  such  removal.”  In  case  the 
meter  was  found  to  be  slow  the  company  was  to  have  author- 


ARTIFICIAL  GAS  FRANCHISES. 


587 

ity  to  collect  from  the  consumer  an  amount  to  be  determined 
in  a  similar  way. 

258.  Percentage  payment  of  receipts  from  all  sources,  in¬ 
cluding  by-products— Nashville. — On  February  20,  1900,  the 
Nashville  Gas  Company  was  granted  a  twenty-five  year  license 
from  the  city  for  the  manufacture  and  distribution  of  gas.1 
It  was  stipulated  that  when  the  company  should  tear  up  a 
macadam  street  for  the  purpose  of  laying  or  repairing  pipes, 
it  should  on  refilling  the  excavation  thoroughly  stamp  each 
six-inch  layer  of  material  used,  but  the  top  layer  was  in  every 
instance  to  be  “  new,  clean  macadam  filled  to  a  depth  not  less 
than  ten  inches.”  The  company  was  required  to  furnish  “  a 
good  commercial  gas  suitable  for  illuminating  and  fuel  pur¬ 
poses  ”  capable  of  producing  light  of  16  candlepower  “  as 
near  as  practicable,  but  never  less  than  15  candlepower,”  in 
a  burner  using  five  feet  of  gas  per  hour.  The  price  to  be 
charged  was  not  to  be  more  than  $1.10  per  1,000  feet  with  a 
discount  of  10  cents  per  1000  on  bills  paid  in  the  first  five  busi¬ 
ness  days  of  the  month  following  the  month  for  which  they 
were  rendered.  The  company  was  required  to  make  an  annual 
payment  to  the  city  of  5  per  cent  of  its  gross  receipts  “  de¬ 
rived  from  gas,  coke,  tar,  ammonia  and  meter  rents.”  At 
any  time  after  ten  years  the  city  was  to  have  the  right,  upon 
giving  twelve  months’  notice,  to  purchase  the  company’s 
plant,  “  embracing  every  appliance  thereof  for  the  manufac¬ 
ture  and  furnishing  gas  for  lighting  and  heating.”  Such 
purchase  was  to  be  at  a  fair  valuation  to  be  arrived  at  by 
arbitration.  It  was  expressly  agreed  by  the  company  that  the 
sale  under  these  circumstances  should  “  be  taken  and  con¬ 
strued  as  a  voluntary  surrender”  of  the  franchise,  which 
should  not  be  valued  in  the  appraisal.  The  value  of  the  plant 
and  appliances  was  to  be  fixed,  however,  as  that  of  “  a  plant 
in  actual  operation,  the  right  to  the  immediate  operation  of 
which  will  vest  upon  the  completion  of  the  sale,  exclusively  ” 
in  the  city.  The  company  was  required  to  file  an  annual 
sworn  statement  with  the  city,  and  the  city  recorder  .or  some 
expert  designated  by  the  mayor  and  council  was  to  have  the 
right  at  all  times  to  examine  the  company’s  books  and  ac¬ 
counts  and  to  report  to  the  city  authorities.  It  was  particu¬ 
larly  stipulated  that  no  convict  labor  should  be  used  by  the 

1  Laws  of  Nashville,  op.  cit p.  1030. 


588 


MUNICIPAL  FRANCHISES. 


company  or  by  any  person  or  corporation  working  for  the 
company,  and  that  the  company  should  not  use  any  material 
that  was  a  production  of  convict  labor.  It  was  provided  that 
whenever  the  city  paved  a  street  with  granite,  brick,  asphalt, 
or  any  other  permanent  material,  before  the  work  was  done 
the  company  should  run  the  service  pipe  from  its  mains  to 
the  sidewalk  for  each  and  every  lot  “  no  matter  whether  such 
lot  be  vacant  or  improved.”  This  ordinance  was  submitted  to 
the  qualified  voters  of  the  city  and  ratified  by  them  by  a  vote 
of  1,301  to  101  at  an  election  held  April  19,  1900. 

259.  Gas  charter  awarded  after  public  advertisement— 
Springfield,  Ill. — By  a  special  act  of  the  legislature  of  Illi¬ 
nois  approved  February  27,  1854,  five  individuals  and  their 
associates  were  created  a  body  corporate  and  politic  under 
the  name  of  the  Springfield  Gas  Light  Company.1  This 
corporation  was  given  authority  to  manufacture  and  sell  gas 
“  to  be  made  from  any  and  all  substances  or  combinations 
thereof,  from  which  inflammable  gas  is  or  hereafter  may  be 
obtained.”  The  company  was  also  authorized  to  erect  the 
necessary  works  and  lay  pipes  for  conducting  the  gas  in  any 
of  the  streets  of  Springfield  or  its  suburbs,  on  the  sole  con¬ 
dition  that  no  permanent  injury  should  be  done  to  any  such 
street.  The  company  was  given  the  exclusive  privilege  of 
supplying  gas  for  lighting  purposes  for  a  period  of  twenty- 
five  years.  It  was  provided,  however,  that  the  persons  named 
in  the  act  as  the  corporators  should  receive  proposals  from 
any  association  or  individual  for  supplying  the  city,  its  citi¬ 
zens  and  the  state  buildings  and  offices  with  gas.  Each  pro¬ 
posal  was  to  state  the  price  at  which  gas  would  be  furnished, 
the  quality  of  the  gas,  and  the  time  when  the  work  would  be 
commenced  and  finished.  All  the  proposals  received  were  to 
be  submitted  to  the  Governor,  the  State  Auditor  and  the 
State  Treasurer,  who  were  to  award  the  charter  to  the  asso¬ 
ciation  which  in  their  judgment  offered  the  most  advan¬ 
tageous  terms  to  the  public.  The  parties  receiving  the  award 
were  to  execute  a  bond  in  the  sum  of  $10,000  to  the  city  to 
guarantee  their  compliance  with  the  terms  and  conditions 
offered  by  them,  and  thereupon  they  were  to  become  incor¬ 
porated  and  invested  with  the  privileges  conferred  by  the 
act  and  supersede  the  corporation  created  by  the  act.  It  was 

1  Private  Laws  of  1854,  Special  Session,  p.  189. 


ARTIFICIAL  GAS  FRANCHISES. 


589 


provided,  however,  that  the  company  must  secure  the  consent 
of  the  city  before  occupying  any  street  or  alley  with  its  pipes. 

On  April  18,  1854,  in  accordance  with  the  terms  of  this 
act,  the  gas  charter  was  awarded  to  certain  individuals  who 
submitted  a  proposition  to  build  works  and  supply  the  city 
of  Springfield  with  gas.1  According  to  the  terms  of  their 
proposal,  they  were  to  lay  down  at  least  two  miles  of  pipes 
and  as  much  more  as  might  be  necessary  to  furnish  gas  to 
the  main  business  parts  of  the  city.  They  were  also  to  extend 
their  gas  pipes  to  any  parts  of  the  city  when  directed  to  do  so 
by  the  city  authorities,  on  condition  that  for  such  extensions 
the  city  should  guarantee  to  them  an  income  from  the  con¬ 
sumption  of  gas  by  individuals  yielding  not  less  than  eight 
per  cent  on  the  cost  of  the  extensions.  It  is  to  be  noted  that 
this  return  on  the  investment  was  to  be  in  addition  to  any 
revenue  derived  from  street  lamps  on  the  extensions  laid. 
The  applicants  bound  themselves  to  furnish  a  full  supply  of 
gas  equal  in  quality  to  that  being  furnished  at  the  time  by  the 
Chicago  and  St.  Louis  Gas  Light  Companies.  All  individuals 
along  the  lines  of  the  gas  mains  desiring  service  were  to  be 
supplied  at  the  rate  of  $3.25  per  1000  cubic  feet.  Consumers 
were  to  furnish  their  own  burners  and  fixtures.  The  city  was 
to  pay  $20  a  year  for  the  gas  consumed  by  each  street  lamp 
erected  by  the  company  at  the  city’s  expense,  and  $5  addi¬ 
tional  for  the  care  of  each  lamp.  The  city  had  the  alterna¬ 
tive,  however,  of  taking  gas  at  the  regular  price  charged  to 
private  consumers.  The  applicants  proposed  to  commence 
work  within  thirty  days  after  obtaining  authority  from  the 
city  and  stated  that  they  would  expect  to  complete  their  work 
during  the  current  year.  In  fact,  they  would  agree  to  do  so, 
with  the  provision  that  if  they  were  delayed  “by  any  unto¬ 
ward  and  unexpected  event,”  such  as  the  prevalence  of  an 
epidemic  sickness  to  a  degree  sufficient  to  embarrass  them, 
or  the  impossibility  of  obtaining  brick  or  other  materials,  no 
forfeiture  should  operate  against  them  until  the  first  of  May 
of  the  succeeding  year,  1855. 

By  an  ordinance  passed  April  20,  1854,  the  city  gave  its 
consent  to  the  laying  of  gas  pipes  by  this  company.2  A  few 
simple  conditions  relating  to  the  tearing  up  of  the  streets  and 
the  indemnification  of  the  city  against  damages  were  attached 

1  Franchise  Ordinances,  City  of  Springfield,  op.  cit.,  p.  37.  1 1  bid p,  40. 


590 


MUNICIPAL  FRANCHISES. 


to  this  consent,  and  the  city  accepted  the  price  for  public 
street  lighting  offered  by  the  company,  that  is  to  say,  $20  per 
annum  for  each  lamp,  and  the  gas  consumed  by  it,  and  $5 
in  addition  for  maintaining  it.  In  1884  the  company’s  priv¬ 
ileges  were  extended  for  a  period  of  ten  years  on  certain 
conditions.1  The  price  for  street  lamps  was  to  be  reduced  to 
$15  a  year  per  lamp,  including  all  charges  for  maintenance. 
The  price  for  gas  used  by  the  city  for  purposes  other  than 
street  lighting,  and  for  gas  furnished  to  private  consumers 
was  to  be  $1.50  per  1,000  cubic  feet,  but  the  company  was 
authorized  to  add  a  penalty  of  25  cents  per  1,000  feet  to  bills 
of  consumers  who  failed  to  pay  within  ten  days  after  the  end 
of  each  month.  The  city  reserved  the  right  to  order  exten¬ 
sions  of  gas  pipes  on  condition  that  the  company  should  be 
assured  a  consumption,  either  by  the  city  or  by  private  indi¬ 
viduals,  of  not  less  than  1,000  cubic  feet  of  gas  per  day  for 
«very  400  feet  of  the  extension.  No  other  company  was  to  be 
given  a  franchise  during  the  ten-year  period. 

By  an  ordinance  passed  May  20,  1895,  the  city  gave  a  fran¬ 
chise  to  the  Provident  Gas  Company.2  Under  this  grant  the 
company  was  to  furnish  service  pipes  at  its  own  expense.  It 
was  to  supply  illluminating  gas  with  an  average  quality  of 
22  candle-power  at  a  maximum  price  to  private  consumers  of 
85  cents  per  1000  cubic  feet  of  gas  used  for  lighting  and  of 
€5  cents  for  gas  used  for  fuel,  with  the  provision  that  a 
penalty  of  10  cents  per  1,000  feet  could  be  added  “  if  bills  are 
not  paid  by  a  certain  date  in  each  calendar  month  to  be  fixed 
by  said  company  and  stated  in  said  bills.”  The  city  reserved 
the  right  to  request  the  company  to  furnish  gas  and  service 
for  street  lamps  at  a  rate  of  $12  per  annum  for  each  lamp 
“  consuming  five  cubic  feet  of  gas  per  hour  with  boulevard 
globes.”  The  company  was  to  pay  into  the  city  treasury  dur¬ 
ing  the  first  five  years  of  its  franchise,  a  sum  equal  to  one 
per  cent  of  its  gross  receipts,  and  after  the  expiration  of  the 
five-year  period,  a  sum  equal  to  two  per  cent  of  its  gross  re¬ 
ceipts.  The  franchise  was  granted  for  a  period  of  twenty 
years,  on  the  express  condition  that  at  the  expiration  of  the 
period  the  city  should  have  the  right  to  purchase  the  com¬ 
pany’s  entire  plant  and  all  its  property  and  effects  of  every 
description  within  the  limits  of  the  city  at  an  appraised 

1  Franchise  Ordinances,  op.  cit.,  p.  41.  <  *  Ibid.,  p.  44. 


ARTIFICIAL  GAS  FRANCHISES. 


591 


valuation.  One  appraiser  was  to  be  appointed  by  the  city 
and  one  by  the  company,  and  the  two  so  selected  were  to 
choose  a  third,  but  if  they  could  not  agree  upon  a  third, 
then  he  was  to  be  selected  by  the  judge  of  the  Circuit  Court 
of  Sangamon  County. 

260.  Exclusive  grant  for  twenty  years  to  highest  and  best 

bidder — Newport,  Ky. — On  June  3,  1880,  an  ordinance  was 
passed  by  the  city  of  Newport  granting  to  the  Newport  Light 
Company  an  exclusive  privilege  of  supplying  gas  to  the  city 
and  its  inhabitants  for  a  period  of  twenty-five  years,  and  until 
the  city  should  give  the  company  twelve  months’  notice  of  the 
termination  of  the  franchise.1  The  gas  furnished  was  to  be 
equal  in  quality  to  Cincinnati  gas.  The  price  to  the  city  for 
gas  used  in  its  street  lamps  was  to  be  $1.20  per  1000  cubic 
feet,  and  gas  was  to  be  furnished  to  private  consumers  at 
$1.90  for  the  five-year  period  from  June  11,  1882;  at  $1.80 
for  the  succeeding  five-year  period;  and -at  $1.75  for  the  fif¬ 
teen  years  thereafter,  with  a  five  per  cent  discount  during  the 
entire  franchise-period  for  cash  within  ten  days.  The  com¬ 
pany  was  to  furnish  the  street  lamps,  lamp-posts  and  all 
necessary  fixtures,  and  erect  them  at  such  times,  in  such  num¬ 
bers  and  at  such  points  along  the  company’s  mains  as  the 
city  might  direct.  The  city  might  even  order  the  lamp-posts 
to  be  moved  from  one  point  to  another  at  the  company’s 
expense.  If  the  use  of  any  lamp-post  was  discontinued,  how¬ 
ever,  the  city  was  required  to  purchase  it,  with  the  requisite 
fixtures,  at  the  original  cost.  Street  lamps  were  to  be  cleaned, 
lighted  and  kept  in  repair  at  the  expense  of  the  city.  In  case 
the  company  refused  to  extend  its  pipes  to  any  point  required 
by  the  city  for  the  purpose  of  supplying  public  lamps  with 
gas,  the  city  reserved  the  right  to  lay  the  pipes  at  its  own 
expense.  The  company  was  not  authorized  to  use  such  pipes 
excepting  for  the  purpose  of  furnishing  gas  for  public  lamps, 
or  to  lay  other  pipes  in  the  same  streets  until  it  had  refunded 
to  the  city  the  entire  amount  of  its  expense  in  making  such 
extensions.  The  company  was  unconditionally  obligated, 
however,  to  lay  not  less  than  1,000  feet  of  gas  pipe  every  year 
at  the  request  of  the  city.  It  was  recited  in  this  ordinance 
that  the  existing  contract  between  the  city  and  the  Covington 
Gas  Light  Company  would  expire  on  June  11,  1882,  and  that 

1  Special  Ordinances,  City  of  Newport,  Ky.,  p.  386. 


592 


MUNICIPAL  FRANCHISES. 


under  the  terms  of  this  contract  either  the  city,  or  the  com¬ 
pany  securing  a  new  lighting  contract  with  the  city,  could 
purchase  the  old  company’s  pipes,  lamp-posts  and  fixtures  at 
a  valuation  to  be  determined  under  the  original  ordinance  of 
June  11,  1857.  Accordingly,  this  right  to  purchase  was 
assigned  by  the  city  to  the  Newport  Light  Company,  and  in 
turn  the  city  reserved  the  right  to  purchase  this  company’s 
property  at  the  expiration  of  the  franchise  unless  the  grant 
should  be  renewed.  The  company  was  authorized  to  adopt 
“  any  other  mode  equal  to  gas  for  supplying  light  to  the  city 
and  its  inhabitants  ”  on  condition  that  such  other  light  should 
be  furnished  at  no  greater  cost  than  the  cost  of  gas  light. 

In  1904  notice  was  served  upon  the  successor  of  the  New¬ 
port  Light  Company  that  its  franchise  would  not  be  renewed. 
Accordingly,  an  ordinance  was  passed  May  5,  1905,  requiring 
the  city  clerk  to  advertise  for  two  weeks  in  various  local  and 
Cincinnati  papers  and  one  engineering  journal  to  the  effect 
that  the  General  Council  of  the  city  of  Newport  would 
receive  sealed  bids  for  the  exclusive  franchise  of  supplying 
artificial  gas  in  the  city  for  a  period  of  twenty  years.1  The 
franchise  was  to  be  awarded  to  the  highest  and  best  bidder, 
but  the  General  Council  reserved  the  right  to  reject  any  and 
all  bids  offered.  Certain  conditions  were  enumerated  which 
would  apply  to  the  successful  bidder  or  his  successors.  Gas 
was  to  be  supplied  not  later  than  June  12,  1907,  throughout 
all  that  portion  of  the  city  which  at  the  time  was  being  fur¬ 
nished  under  the  existing  gas  franchise,  and  the  gas  mains 
were  to  be  extended  from  time  to  time  whenever  the  owners 
of  one-half  of  the  frontage  of  the  property  abutting  upon  the 
proposed  extension  should  petition  the  General  Council  for 
an  extension,  and  the  General  Council  should  order  it.  The 
cost  of  service  connections  was  to  be  divided  between  the  com¬ 
pany  and  the  consumer  at  the  curb  lines.  The  gas  furnished 
was  to  be  of  not  less  than  16  candle-power,  600  heat  units  per 
cubic  foot  and  thirty-tenths  pressure.  The  successful  bidder 
was  to  execute  a  bond  in  the  sum  of  $50,000  to  indemnify  the 
city  against  damages  caused  by  the  exercise  of  the  franchise, 
and  an  additional  bond  in  the  sum  of  $10,000  to  guarantee 
the  faithful  performance  of  the  conditions  prescribed  in  the 
ordinance.  In  case  the  successful  bidder  should  furnish  gas 

1  Special  Ordinances,  op.  cit p.  380. 


ARTIFICIAL  GAS  FRANCHISES. 


593 


to  any  town  or  district  in  the  vicinity  at  a  lower  rate  than 
stipulated  in  the  bid  for  the  city  of  Newport,  then  such  lower 
rate  should  immediately  become  effective  in  Newport.  The 
conditions  upon  which  street  work  was  to  be  done  were  care¬ 
fully  prescribed.  The  city  reserved  the  right  of  purchase  at 
the  expiration  of  the  grant  by  giving  one  year’s  previous 
notice,  and  agreed  to  transfer  to  the  successful  bidder  its 
option  of  purchase  of  the  pipes  and  fixtures  of  the  existing 
company.  It  was  provided  that  “  the  provisions  of  this 
ordinance  shall  apply  to  and  mean  artificial  gas,  and  no 
other.”  By  a  resolution  approved  July  6,  1905,  the  bid  of 
B.  Bramlage  to  furnish  gas  at  a  net  price  of  70  cents  per 
1,000  feet  was  accepted. 

261.  Extensions  at  the  discretion  of  the  common  council. 
— Syracuse.  — The  first  gas  franchise  granted  by  the  city  of 
Syracuse  was  given  in  1849.  Another  grant  was  made  in 
1880,  but  neither  of  these  contained  any  particularly  impor¬ 
tant  provisions.1  On  February  20,  1890,  however,  a  franchise 
was  granted  to  the  Onondaga  Gas  Light  Company  which 
required  among  other  things  that  in  all  cases  where  the  city 
contemplated  laying  asphalt  pavements,  notice  of  its  intention 
must  be  given  to  the  gas  company  at  least  sixty-five  days 
before  the  commencement  of  the  work,  in  order  to  enable 
the  company  to  lay  its  pipes  and  mains  in  advance  of  the 
improvement.  The  company  was  required  to  render  a  weekly 
report  to  the  proper  city  official  of  all  openings  it  had  made 
in  the  pavements  for  laying  or  repairing  service  pipes  or  for 
the  discovery  or  stoppage  of  leaks.  The  company  was  also 
to  render  a  monthly  report  of  the  mains  which  it  had  laid 
during  the  preceding  month.  It  was  provided  that  if  the 
company  failed  to  replace  the  pavements  or  repair  the  streets 
which  had  been  disturbed  by  its  work  or  to  maintain  them 
for  a  period  of  one  year,  such  restoration  and  maintenance 
were  to  be  taken  care  of  by  the  city,  and  the  expense  was  to 
be  paid  by  the  company  as  a  special  deposit  for  street  and 
highway  repairs.  Furthermore,  the  company  was  to  be  penal¬ 
ized  in  the  sum  of  $25  a  day  for  every  day’s  failure  or  neglect 
to  repave  or  repair  the  street  after  proper  notice  from  the  city 
to  do  so.  The  company  agreed  to  lay  the  necessary  mains 
and  pipes  through  all  the  streets  and  alleys  of  the  city  <e  where 

1  Abstracts  of  pras  and  other  franchises  of  Syracuse  were  furnished  to  the  author 
by  Dr.  Chas.  W.  Tooke. 


594 


MUNICIPAL,  FRANCHISES. 


the  same  are  now  built  up  and  improved/’  and  also  through 
all  streets  and  alleys  “  that  may  hereafter  be  so  built  up 
whenever  the  common  council  of  said  city  shall  direct.” 

Another  franchise  was  granted  on  June  17,  1895,  to  Frank 
Hiscock  and  others,  which  contained  a  clause  to  the  effect 
that  all  mains,  lateral  pipes,  connections  and  other  appliances 
for  manufacturing  and  supplying  gas  should  be  constructed 
and  maintained  under  the  supervision  and  direction  of  the 
commissioner  of  public  works,  and  should  be  “  of  such  mate¬ 
rials,  quality  and  weight  as  shall  be  approved  by  the  common 
council.”  The  grantees  were  required  at  their  own  expense 
to  furnish  and  lay  all  service  pipes  through  the  wall  of  the 
building  of  any  person  desiring  to  have  gas  connections.  It 
was  expressly  provided  that  when  the  council  should  deter¬ 
mine  to  pave  any  street  the  grantees,  if  directed  to  do  so  by 
resolution  of  the  council,  should  lay  their  mains  and  service 
pipes  in  such  streets,  within  a  certain  specified  period  after 
receiving  notice.  In  .case  they  failed  to  lay  the  pipes  within 
the  time  limit  set,  the  commissioner  of  public  works  was  to 
be  authorized  to  lay  such  mains  and  service  pipes  at  the 
expense  of  the  grantees.  In  case  they  refused  to  pay  the  bills 
within  ten  days  after  delivery,  the  expense  of  the  work  was  to 
be  assessed  against  their  property  and  collected  in  connection 
with  taxes.  There  was  a  general  provision  requiring  the 
grantees  to  lay  gas  pipes  on  streets  contiguous  to  streets 
where  pipes  were  already  laid,  within  ninety  days  after  being 
ordered  to  do  so  by  the  council;  on  the  condition,  however, 
that  in  the  opinion  of  the  council  the  amount  of  gas  consumed 
by  the  parties  for  whose  benefit  the  extensions  were  made 
would  justify  the  laying  of  the  pipes  and  the  making  of  the 
connections.  The  commissioner  of  public  works  was  author¬ 
ized  to  appoint  proper  persons  to  superintend  the  laying  of 
pipes  and  the  repairing  of  the  streets  during  the  time  that 
the  grantee’s  lines  were  in  process  of  construction,  and  the 
salaries  of  such  superintendents  “not  exceeding,  however, 
one  person  for  every  two  blocks  on  any  one  street  at  a  rate  not 
exceeding  $3  per  day  for  each  person  so  employed  ”  were  to 
be  paid  by  the  grantees. 

Another  franchise  granted  December  18,  1893,  to  the  Syra¬ 
cuse  Gas  Company  contained  no  important  provisions  not 
included  in  the  preceding  ones. 


CHAPTER  XXI. 


GAS  FRANCHISES  IN  CITIES  WITHIN  REACH  OF  NAT¬ 
URAL  GAS  FIELDS. 


262.  Natural  gas  superseding  artificial 

gas. — Cincinnati. 

263.  Artificial  and  natural  gas  in  com¬ 

petition.— Cleveland. 

264.  Ten  per  cent  gross  receipts  tax  on 

natural  gas  sold  for  more  than  15 
cents  per  1000  feet.— Columbus, 
Ohio. 

265.  Manufactured  gas  entirely  super¬ 

seded.— Kansas  City,  Mo. 

266.  Division  of  net  earnings  with  city. 

—Topeka,  Kansas. 

267.  Artificial  gas  for  lighting  supplied 

by  the  city,  and  natural  gas  for 
fuel  supplied  by  companies.— 
Wheeling. 

268.  Partnership  versus  control.— Balti¬ 

more. 

269.  Extensions  of  service ;  artificial 

gas  franchises  in  Indianapolis. 


270.  General  franchises  for  the  supply  of 

natural  gas  subject  to  acceptance 
by  any  person  or  corpoi’ation. — 
Indianapolis. 

271.  Low  rates  ;  limited  profit ;  ultimate 

municipal  ownership.— Indianap¬ 
olis. 

272.  The  city’s  distributing  system  for 

natural  gas  leased  on  failure  of 
supply. — Toledo. 

273.  Franchise  exclusive  on  certain  con¬ 

ditions. — Erie,  Pa. 

274.  Price  of  gas  to  be  readjusted  to  new 

inventions  and  improvements. — 
Salt  Lake  City. 

275.  Rates  reduced  with  increase  of 

sales.— Detroit. 

276.  An  85  cent  rate  ordinance  passed 

over  the  Mayor’s  veto.— Chicago. 


262.  Natural  gas  superseding  artificial  gas— Cincinnati. 

— Under  the  general  laws  of  Ohio  the  rates  charged  for  either 
natural  gas  or  artificial  gas  are  subject  to  regulation  once  in 
ten  years  by  municipal  ordinance.  Exercising  this  authority, 
the  Board  of  Legislation  of  Cincinnati  passed  an  ordinance 
July  31,  1899,  fixing  the  rates  to  be  charged  by  the  Cincinnati 
Gas  Light  and  Coke  Company  for  the  succeeding  period  of 
ten  years  at  75  cents  per  1000  cubic  feet  of  16  candle-power 
gas  furnished  to  public  buildings  and  to  private  consumers 
for  illuminating  purposes;  and  at  50  cents  for  gas  used 
exclusively  for  heating  or  fuel  purposes  through  a  separate 
service  and  meter.1  The  company  was  entitled,  however,  in 
either  case  to  charge  an  additional  10  cents  per  1000  feet  on 
bills  not  settled  “  within  the  five  calendar  discount  days  here¬ 
tofore  allowed.” 


1  Ordinance  No.  341,  Ordinances  of  the  City  of  Cincinnati,  p.  124. 

595 


596 


MUNICIPAL  FRANCHISES. 


On  December  26,  1905,  a  new  franchise  was  granted  by 
the  city  council  to  the  Cincinnati  Gas  and  Electric  Company, 
authorizing  it  to  supply  natural  gas  for  heat,  light  and 
power  “  and  all  other  necessary  uses  by  both  public  and 
private  consumers.”  1  The  company  was  to  use,  however,  its 
existing  distributing  system  and  such  extensions  of  its  system 
as  might  thereafter  be  authorized  or  made.  Authority  was 
granted  to  open  the  streets  for  laying  additional  mains, 
pipes  and  fixtures  from  time  to  time  for  the  transportation 
of  natural  gas  to  consumers  “throughout  the  city,  as  the 
same  now  exists  or  may  hereafter  be  extended  by  annexation 
or  otherwise.”  The  declared  object  of  the  grant  was  “  to 
enable  and  require  said  company  as  far  as  practicable  to  use 
its  present  gas  pipe  system  and  so  avoid  as  far  as  may  be  the 
necessity  of  opening  or  disturbing  the  public  ways  and 
grounds  for  the  purpose  of  supplying  the  city  and  its  inhab¬ 
itants  with  natural  gas.”  It  was  provided  that  if  the  com¬ 
pany,  through  no  fault  of  its  own,  should  be  unable  to  supply 
natural  gas  in  sufficient  quantities  because  of  the  failure  or 
deficiency  of  its  own  supply,  or  on  account  of  its  inability 
to  purchase  a  supply  from  other  companies  delivered  to  the 
company’s  mains  at  a  reasonable  contract  price,  then  the 
company  should  furnish  artificial  gas  on  the  conditions, 
regulations  and  limitations  that  would  have  been  in  force  if 
the  new  franchise  had  not  been  granted.  It  was  stipulated, 
however,  that  before  the  company  should  be  permitted  to 
charge  the  rates  fixed  for  artificial  gas,  or  any  other  rates  in 
excess  of  the  rates  fixed  for  natural  gas,  it  should  first 
establish  to  the  satisfaction  of  the  Board  of  Public  Service 
that,  through  no  fault  of  its  own,  it  was,  on  account  of  the 
failure  of  its  own  supply,  unable  to  furnish  natural  gas,  and 
that  it  was  unable  to  purchase  such  gas  at  a  price  determined 
to  be  reasonable  by  this  board. 

The  company  was  required  within  six  months  to  commence 
laying  the  necessary  mains  within  the  city  limits  to  conduct 
natural  gas  to  its  holders,  and  to  make  the  necessary  con¬ 
nections  and  lay  the  necessary  mains  and  to  construct  all 
proper  appliances  to  enable  it  to  supply  natural  gas.  All  of 
this  work  was  to  be  completed  within  one  year  after  the 
acceptance  of  the  franchise.  The  company  was  also  to  begin 

1  Ordinance  No.  1222,  Ordinances  of  the  City  of  Cincinnati ,  p.  58. 


NATURAL  GAS  FRANCHISES. 


597 


within  six  months  to  lay  the  main  line  or  lines  from  the 
nearest  source  of  adequate  supply  to  the  city  of  Cincinnati, 
such  line  or  lines  to  consist  of  continuous  piping  of  sufficient 
size  and  capacity  to  supply  the  consumption  demanded.  This 
work  was  also  to  be  completed  within  one  year  from  the 
acceptance  of  the  franchise,  unless  prevented  by  bona  fide 
litigation  or  other  causes  beyond  the  company’s  control.  Any 
existing  mains  and  service  connections  physically  unsuitable 
for  the  distribution  of  natural  gas  were  to  be  immediately 
repaired  and  replaced  with  suitable  ones  subject  to  the  inspec¬ 
tion  and  approval  of  the  Board  of  Public  Service.  This  work 
also  was  to  be  completed  within  a  year,  “  so  that  within  said 
period  every  portion  of  the  city  of  Cincinnati  shall  be  pre¬ 
pared  to  receive  and  use  natural  gas ;  and  said  company  shall 
immediately  thereafter  commence  to  supply  natural  gas  in 
quantities  sufficient  to  meet  the  demands  throughout  the  city.” 
It  was  provided,  however,  that  the  time  consumed  by  delays 
on  account  of  injunctions  and  other  causes  of  a  similar  nature 
should  not  be  considered  in  estimating  the  company’s  time 
limit.  The  Board  of  Public  Service  was  to  give  the  city  and 
its  inhabitants  “  seasonable  notice  ”  within  the  year  and  not 
less  than  thirty  days’  prior  to  the  time  when  the  supply  of 
natural  gas  was  to  begin,  so  that  all  consumers  would  be  in  a 
position  to  make  suitable  provisions,  to  be  first  approved  by 
the  city  authorities,  for  receiving  and  consuming  natural  gas 
upon  their  premises.  The  company  was  authorized  to  pre¬ 
scribe  reasonable  regulations,  to  be  first  approved  by  the 
Board  of  Public  Service,  governing  the  use  of  gas.  A 
preliminary  notice  of  supply  was  to  be  published  in  both 
English  and  German  newspapers,  and  the  company’s  regula¬ 
tions  were  to  be  printed  in  both  these  languages  and  distrib¬ 
uted  by  it  among  the  consumers.  As  soon  as,  and  as  long  as, 
a  sufficient  supply  of  natural  gas  was  available  the  company 
was  to  be  relieved  from  the  obligation  to  furnish  artificial 
gas.  It  was  stipulated  that  whenever  new  service  pipes  were 
required  the  company  should  lay  them  at  its  own  expense  to 
the  inside  of  the  curb  line  and,  with  the  consent  of  *the  owner 
of  the  property,  it  should  place  and  maintain  at  least  one 
service  pipe  to  the  point  of  consumption  on  the  premises. 
Standard  gas  meters,  tested  and  sealed,  were  to  be  furnished 
by  the  company  and  to  remain  at  all  times  subject  to  a  rea- 


598 


MUNICIPAL  FRANCHISES. 


sonable  system  of  inspection  by  “  a  competent,  disinterested 
chemist  or  gas  expert  ”  employed  by  the  city  to  inspect  meters 
npon  complaint ;  to  test  the  pressure  and  heat-unit  quality  of 
the  gas  at  least  once  a  day,  and  to  analyze  the  gas  for 
dilutants  or  impurities.  All  regulations  regarding  the  open¬ 
ing,  restoration  and  repair  of  streets  to  which  the  company 
was  subject  under  its  old  franchises  were  to  remain  in  force. 
Permits  from  the  proper  authorities  were  required  before 
the  commencement  of  any  street  work  and  the  company  was 
obligated  to  execute  an  indemnity  bond  in  favor  of  the  city 
in  the  sum  of  $50,000.  The  grant  was  to  continue  for  a 
period  of  25  years  subject  to  the  the  right  of  the  city  to 
regulate  the  price  of  natural  gas  from  time  to  time  as 
provided  by  law  and  to  purchase  the  company’s  plant  and 
works.  This  franchise  was  expressly  non-exclusive.  The 
heat  quality  of  the  gas  furnished  by  the  company  was  to  be 
of  not  less  than  800  British  Thermal  Units  to  the  cubic  foot, 
as  furnished  at  the  point  of  consumption,  and  the  pressure 
was  never  to  be  less  than  four  ounces  or  more  than  twelve 
ounces  to  the  square  inch  at  that  point.  In  case  the  quality 
of  the  gas  fell  below  the  standard  for  an  aggregate  period  of 
72  hours  in  any  month,  the  bills  to  consumers  were  to  be 
discounted  ten  per  cent  from  the  net  price,  and  an  additional 
discount  of  ten  per  cent  was  to  be  allowed  for  every  additional 
72  hours  or  portion  of  that  time  during  which  the  gas  was 
below  the  standard.  It  was  provided  that  if  the  company 
should  be  unable  to  furnish  and  distribute  natural  gas  within 
the  period  required,  or  should  refuse  to  do  so  in  accordance 
with  the  prices  fixed  by  the  city  council,  or  should  fail  to 
comply  with  any  of  the  conditions  of  this  franchise,  it  should 
thereupon  at  the  option  of  the  city,  forfeit  all  the  privileges 
granted  by  this  ordinance. 

By  another  ordinance  passed  on  the  same  date,  the  city 
council  established  a  natural  gas  rate  “  for  street  lighting  and 
all  other  purposes  and  to  private  consumers,”  of  40  cents  per 
1000  cubic  feet  with  a  discount  of  10  cents  per  1000  on  bills 
paid  before  the  tenth  day  of  the  month  following  that  in 
which  the  gas  was  used.1 

As  a  matter  of  fact,  under  this  ordinance  as  late  as  May 
27,  1909,  the  company  was  supplying  natural  gas  to  only 

1  Ordinance  No.  1223,  Ordinances  of  the  City  of  Cincinnati,  p.  64. 


NATURAL  GAS  FRANCHISES. 


599 


about  one-third  of  the  city.  It  was  expected,  however,  that 
natural  gas  would  be  supplied  to  the  whole  city  not  later  than 
the  following  July.  A  partial  supply  of  natural  gas  was  at 
that  time  being  obtained  through  the  Ohio  Gas,  Fuel  and 
Supply  Company,  from  the  natural  gas  fields  of  Ohio.  There 
was  under  construction,  however,  a  pipe  line  from  the  West 
Virginia  gas  fields,  from  which  the  company  expected  to 
receive  its  ultimate  supply. 

263.  Artificial  and  natural  gas  in  competition— Cleve¬ 
land. — The  original  franchise  of  the  Cleveland  Gas  Light  and 
Coke  Company  was  granted  to  certain  individuals  on  March 
9,  1849.1  The  pipes  laid  were  to  be  of  cast-iron  or  other 
material  equally  durable.  In  case,  however,  the  grantees 
wished  to  use  other  material  than  cast-iron  they  were  to 
execute  a  bond  to  the  city  guaranteeing  “  that  said  pipes  if 
made  of  other  material  than  cast  iron,  shall  be  equally  as  good 
and  durable  as  iron,  and  if  not  found  so,  to  substitute  iron 
within  such  time  as  the  council  may  prescribe.”  Gas  for 
public  lamps  along  the  company’s  “  leading  or  main  pipes  99 
was  to  be  furnished  at  “  a  price  not  exceeding  the  prices  paid 
either  in  Cincinnati,  in  this  State,  or  in  Buffalo,  New  York.” 
The  lamp-posts,  meters  and  lamps  were  to  be  furnished  at  the 
expense  of  the  city.  The  price  of  gas  to  private  consumers 
was  not  to  exceed  $3  per  1000  feet.  If  at  any  time  the  city 
council  desired  to  erect  lamps  at  engine  houses  or  any  other 
public  buildings,  grounds,  and  bridges  within  the  city  and 
the  grantees  refused  for  a  reasonable  compensation  to  extend 
the  gas  pipes  as  required  for  such  purposes,  then  the  city  was 
to  have  the  privilege  of  extending  the  mains  and  providing 
for  as  many  public  lamps  for  the  purposes  mentioned  as  it 
might  deem  necessary.  The  lamps  thus  erected  were  to  be 
furnished  with  gas  by  the  grantees,  and  the  pipes  laid  down  at 
the  expense  of  the  city  were  not  to  be  used  directlly  or 
indirectly  except  with  the  city’s  consent  for  furnishing  gas  to 
individual  citizens,  and  the  grantees  were  not  to  lay  down  any 
other  gas  pipes  in  the  same  streets  until  they  had  refunded  to 
the  city  the  entire  amount  it  had  expended  in  laying  the  pipes 
in  the  first  instance.  The  grantees  were  to  commence  work 
on  or  before  the  first  day  of  May,  1850,  and  lay  240  rods  of 
leading  pipe  by  the  first  day  of  October  following.  Their 

1  Special  Ordinances,  op.  cit p.  5. 


600 


MUNICIPAL  FRANCHISES. 


apparatus  for  generating  gas  was  to  be  completed  by  the  first 
of  December  of  the  same  year.  It  was  stipulated  that  tem¬ 
porary  failure  to  perform  any  of  the  conditions  exacted  of 
them,  except  as  regarded  the  original  completion  of  the  work, 
when  such  failure  was  occasioned  by  accident  or  untoward 
events,  should  not  work  the  forfeiture  of  their  privileges, 
“  provided  such  accidents  or  events  be  remedied  within  a 
reasonable  time 

In  or  about  1867,  the  city  granted  another  franchise,  this 
time  to  the  People's  Gas  Light  Company.1  Rates  for  public 
lighting  were  limited  to  $2.25  per  1,000  feet  and  the  rates 
to  private  consumers  were  not  to  exceed  $3.  The  company 
was  to  lay  service  pipes  from  its  mains  to  the  houses  of 
persons  desiring  to  have  gas  connections  “  at  as  low  a  price 
as  may  be  charged  by  responsible,  practical  plumbers."  This 
franchise  contained  the  same  provisions  in  regard  to  exten¬ 
sions  and  forfeiture  as  were  contained  in  the  earlier  grant. 
There  was  an  additional  provision  that  after  the  expiration  of 
two  years,  the  city  should  have  the  right  of  purchasing  the 
company's  “  pipes,  buildings,  fixtures  and  other  apparatus 
owned  and  used  by  them  in  and  about  providing  the  city 
and  citizens  with  gas,  at  a  fair  price  and  compensation." 
The  price  was  to  be  determined  by  five  disinterested  persons, 
two  chosen  by  the  city,  two  by  the  company,  and  the  fifth 
by  the  four  thus  selected. 

On  July  23,  1900,  an  ordinance  was  passed  by  the  city  of 
Cleveland  to  fix  the  price  and  prescribe  the  terms  and  con¬ 
ditions  upon  which  the  two  companies  should  be  required  to 
furnish  the  city  and  its  citizens  with  gas  for  the  ensuing  ten 
years.2  The  price  was  fixed  at  75  cents  per  1000  feet,  meters 
to  be  furnished  by  the  companies  at  their  own  expense.  It 
was  declared  that  this  price  should  be  both  a  minimum  and 
a  maximum,  and  should  “  neither  be  increased  nor  diminished 
at  any  time  during  said  period  of  ten  years."  The  com¬ 
panies  agreed  to  pay,  in  semi-annual  instalments  into  the  city 
treasury  6  1-2  per  cent  of  thir  gross  receipts  from  the  sale 
of  gas.  They  were  required  to  make  detailed  statements  to 
the  city  every  six  months  and  to  keep  in  proper  book  form 
complete  and  detailed  accounts  showing  the  quantity  of  coal 
;and  other  materials  used,  the  number  of  cubic  feet  of  gas 

1  Special  Ordinances,  op.  cit.,  p.  8.  *Ibid.,  p.  11. 


NATURAL  GAS  FRANCHISES. 


601 


manufactured  by  them,  the  number  of  meters  in  use,  the 
name  of  each  consumer  and  the  number  of  his  meter,  and  the 
amount  of  gas  consumed  and  paid  for  by  each  consumer. 
All  these  accounts  were  to  be  open  to  the  inspection  of  the 
city  auditor.  If  not  satisfied  with  the  correctness  of  any 
report  furnished  by  the  company,  this  official  was  authorized, 
with  the  mayor's  approval,  to  designate  a  competent  person 
to  make  a  thorough  investigation  of  the  company's  books,  or 
such  of  them  as  he  or  they  should  deem  necessary  to  make 
the  investigation  complete.  In  case  the  company’s  reports 
were  found  to  be  incorrect  as  a  result  of  such  investigation, 
the  reports  were  to  be  corrected  and  the  payment  of  receipts 
to  be  adjusted  accordingly.  The  gas  furnished  by  the  com¬ 
pany  was  to  be  of  not  less  than  17  candle-power.  This 
standard  of  quality  was  specifically  defined  as  such  that  a 
burner  consuming  five  feet  of  gas  per  hour  at  a  pressure  of 
not  more  than  two-tenths  of  an  inch  should  give  a  light  of 
at  least  17  standard  sperm  candles  each  consumming  120 
grains  per  hour.  The  light-giving  quality  of  gas  was  to  be 
determined  by  a  monthly  average  of  semi-weekly  tests  made 
by  the  proper  city  official.  It  was  stipulated  that  there  should 
not  be  more  than  twenty  grains  of  sulphur  or  ten  grains  of 
ammonia  in  any  100  feet  of  gas  and  that  there  should  be  no 
“  sulphureted "  hydrogen.  The  pressure  in  the  mains  was 
to  be  at  all  times  “  wholly  subject  to  and  under  the  control 
and  direction  of  the  Director  of  Public  Works.''  The  com¬ 
panies  wrere  required  to  “  furnish  the  necessary  materials 
and  labor  in  the  lighting,  extinguishing,  cleaning,  furnish¬ 
ing  and  replacing  of  glass,  setting  burners  and  care  of  street 
gas  lamps  "  in  accordance  with  certain  specifications.  Lamps 
were  to  be  lighted  and  extinguished  in  accordance  with  the 
time-table  adopted  from  time  to  time  by  the  Director  of 
Public  Works,  and  the  lighting  and  extinguishment  were  to 
be  done  within  45  minutes  of  the  time  indicated  by  such 
time-table.  All  broken  glass  in  lamps  was  to  be  removed 
and  replaced  with  new  glass.  The  companies  were  also  to 
furnish  lamps,  and  glass  required  for  additional  lamps  or¬ 
dered  by  the  city  from  time  to  time.  The  glass  in  the  public 
gas  lamps  was  to  be  thoroughly  cleaned  at  least  once  a  week, 
and  oftener  if  deemed  necessary  by  the  Director  of  Public 
Works.  Lamps  having  street  signs  attached  to  them  were  to 


602 


MUNICIPAL  FRANCHISES. 


be  replaced  with  the  signs  facing  the  proper  street  after  each 
cleaning,  and  signs  broken  were  to  be  replaced  at  the  expense 
of  the  company.  Burners  were  to  be  examined  every  time 
a  glass  was  cleaned,  and  tested  at  such  times  by  lighting  the 
jet.  When  necessary,  the  burners  were  to  be  cleaned  so  as  to 
give  a  broad,  even  flame  at  all  times.  Worn-out  burners 
were  to  be  replaced  at  the  expense  of  the  company.  Bepairs 
and  renewals  of  lanterns  and  lantern  frames  were  to  be  made 
by  the  companies,  and  the  lowering  of  lamp  service  pipes 
and  the  changing  and  resetting  of  posts  were  to  be  done  by 
the  companies  at  their  own  expense.  The  city  reserved  the 
right  to  increase  or  decrease  at  its  option  the  number  of 
street  lamps  to  be  lighted  and  cared  for  during  the  term  of 
the  ordinance.  Whenever  new  street  lamps  were  desired  by 
the  city,  the  companies  were  bound  to  furnish  at  their  own 
expense  “  all  required  lanterns,  glass,  piping,  labor  of  setting 
posts,  cocks  and  burners,  and  in  fact,  everything  necessary 
to  put  the  said  lamps  in  a  completed  condition  for  use,  ex¬ 
cept  the  posts  which  *  *  *  the  city  is  to  furnish,  the  entire  out¬ 
fit  thus  furnished  by  the  said  companies  respectively  to  be  and 
remain  the  property  of  the  city  of  Cleveland  on  the  termina¬ 
tion  of  this  ordinance,”  except  as  otherwise  provided.  The 
companies  also  agreed  that  if  the  city  should  at  any  time 
within  one  year  from  the  date  of  the  ordinance  decide  to 
replace  its  street  gas  lamps  to  the  number  of  5,000  or  more 
with  “  Welsbach  Boulevard  Gas  Lamps,”  the  companies 
would  furnish,  equip,  maintain  and  supply  with  gas  as  many 
lamps  of  the  Welsbach  Street  Lighting  Company  of  America 
as  the  city  should  require,  for  a  sum  not  to  exceed  $22  a 
year  for  each  lamp  thus  furnished  without  extra  charge  for 
gas  consumed.  The  time  these  lamps  were  to  burn  was  fixed 
at  3,760  hours  a  year  and  each  lamp  was  to  give  a  50  candle- 
power  light.  If  the  city  decided  to  use  this  style  of  lamp, 
however,  the  lamps  were  not  to  become  the  city’s  property  at 
the  expiration  of  the  ten-year  period.  It  was  stipulated, 
however,  that  nothing  in  the  ordinance  should  prevent  the 
city  during  that  period  from  advertising  for  bids  and  letting 
a  contract  for  as  many  Welsbach  boulevard  lamps  or  any 
other  kind  of  gas  lamps  as  it  might  determine,  and  in  that 
event  the  companies  were  to  furnish  gas  for  such  lamps  at  the 
regular  rate  of  75  cents  per  1000  feet.  Tt  was  expressly  pro- 


NATURAL  GAS  FRANCHISES. 


603 


vided  that  nothing  in  the  ordinance  should  be  held  to  re¬ 
quire  the  city  to  continue  to  use  for  public  lighting  during 
the  period  of  ten  years  the  gas  furnished  by  the  companies. 
-Each  of  the  companies  was  required  to  file  its  written  ac¬ 
ceptance  of  the  terms  and  conditions  of  the  ordinance  within 
five  days  after  its  passage. 

Another  ordinance  was  passed  in  the  following  year  au¬ 
thorizing  the  mayor  to  enter  into  an  agreement  with  the 
companies  to  settle  certain  disputes  which  had  arisen.1  It 
was  provided  by  this  agreement  that  the  city  might  discon¬ 
tinue  any  of  the  lamps  in  use  at  any  time ;  but  whenever  the 
city  displaced  an  existing  lamp  and  substituted  another  for 
it,  the  interested  company  was  to  be  relieved  for  the  future 
from  lighting,  extinguishing  and  maintaining  such  lamp  or 
any  additional  lamps,  and  the  city  was  to  be  credited  with 
$2  per  annum  for  each  lamp  furnished  and  maintained  by 
it  or  by  anyone  other  than  the  gas  companies.  In  order  to 
ascertain  the  amount  of  gas  furnished  to  the  city  for  public 
lighting,  tests  were  to  be  made  every  three  months,  or  oftener 
if  either  party  requested  it.  For  each  of  these  tests,  100 
burners  supplied  with  gas  by  the  companies  were  to  be  taken, 
50  from  each  of  two  places,  one  place  selected  by  the  city 
and  one  by  the  company.  The  burners  were  to  be  taken  con¬ 
secutively  in  any  direction  from  each  place,  the  direction  to 
be  designated  by  the  Director  of  Public  Works.  The  tests 
were  to  apply  to  all  lamps  other  than  the  Welsbach  boule¬ 
vard  lamps,  and  in  case  the  consumption  of  gas  by  the  flat- 
flamed  burners  as  shown  by  these  tests  should  be  four  and 
one-half  feet  or  more  per  lamp  per  hour,  the  companies  were 
to  be  paid  on  the  basis  of  four  and  one-half  feet  per  hour 
for  gas  consumed  by  that  class  of  burners.  Otherwise,  if  the 
average  consumption  was  more  than  four  feet,  the  company 
was  to  be  paid  on  the  basis  of  the  average.  It  was  stipulated 
that  the  company  should  be  paid  nothing  for  any  lamp  con¬ 
suming  less  than  four  cubic  feet  per  hour,  but  that  such 
lamp  should  be  counted  as  a  burner  in  obtaining  the  aver¬ 
age,  and  treated  as  consuming  nothing.  For  gas  consumed 
by  other  than  flat-flamed  burners  and  Welsbach  boulevard 
lamps,  payment  was  to  be  made  for  the  amount  of  gas  ac¬ 
tually  consumed  as  shown  by  the  tests.  All  tests  were  to  be 

1  Special  Ordinances ,  op.  cit.,  p.  19. 


604 


MUNICIPAL  FRANCHISES. 


made  under  pressure  of  one  and  six-tenths  inches  of  water. 
The  Director  of  Public  Works  was  authorized  at  any  time, 
having  first  notified  the  company  interested,  to  test  the  pres¬ 
sure  of  gas  furnished  to  any  lamp  by  suitable  apparatus 
provided  for  the  purpose  at  the  joint  expense  of  the  gas  com¬ 
pany  and  the  city.  If  the  director  found  the  pressure  to  be 
less  than  one  and  six-tenths  inches  of  water,  only  half-price 
was  to  be  paid  for  the  gas  consumed  in  that  lamp,  and  if  the 
pressure  was  found  to  be  less  than  one  and  two-tenths  inches, 
the  company  furnishing  the  gas  was  to  be  relieved  from  the 
deduction  as  soon  as  the  pressure  had  been  restored  to  one 
and  six-tenths  inches  as  shown  by  a  new  test. 

On  June  23,  1902,  a  franchise  was  granted  to  the  East 
Ohio  Gas  Company  for  the  transportation  and  supply  of 
natural  or  manufactured  gas  for  fuel  and  heating  purposes 
only.1  The  company  was  required  to  lay  in  all  paved  streets 
occupied  by  it  two  lines  of  pipe,  one  on  either  side  of  the 
street.  These  lines  were  to  be  laid  between  the  curbs  and 
the  property  lines  if  so  ordered  by  the  Director  of  Public 
Works.  If,  however,  the  director  deemed  it  impracticable 
to  lay  the  pipes  in  this  location,  they  were  to  be  laid  under 
the  paved  parts  of  the  street  at  a  distance  of  not  more  than 
4  feet  from  the  curb,  unless  the  space  was  already  occupied. 
The  company  was  not  authorized  to  cross  paved  streets  in 
laying  its  pipes  except  at  street  intersections,  without  the 
consent  of  the  city.  It  was  stipulated  that  the  city  should 
“  do  all  refilling,  puddling,  paving  or  repaving  made  neces¬ 
sary  by  the  construction  and  repair  of  the  mains  and  service 
pipes  and  other  fixtures  ”  in  paved  streets  and  alleys,  but  the 
cost  of  the  work  was  to  be  paid  by  the  company.  Except  as 
thus  provided,  the  company’s  trenches  were  to  be  refilled 
and  the  streets  restored  by  the  company  itself.  The  com¬ 
pany  was  not  to  interfere  in  any  way  with  the  lines  or  prop¬ 
erty  of  any  other  company  building  or  operating  pipes  for  the 
transportation  or  distribution  of  artificial  or  natural  gas,  or 
with  the  water  pipes  or  sewers  of  the  city,  or  with  the  opera¬ 
tion  of  any  street  railway,  or  with  pipes  and  conduits  of 
any  other  person  or  corporation  lawfully  laid  in  the  streets. 
The  company  was  required  to  commence  work  within  thirty 
days  from  the  acceptance  of  the  ordinance,  and  to  be  ready 

1  Special  Ordinances  op.  cit.,p.  22. 


NATURAL  GAS  FRANCHISES. 


605 


to  supply  gas  within  six  months  from  that  time  on  thirty 
miles  of  streets.  Within  18  months  from  the  acceptance  of 
the  ordinance,  the  company  was  to  be  ready  to  supply  100 
miles  of  streets  distributed  through  the  eleven  councilmanic 
districts  of  the  city.  In  addition  to  this  requirement,  the 
company  was  to  extend  its  mains  into  other  streets  when¬ 
ever  contracts  with  at  least  fifty  consumers  to  each  mile 
of  street  were  assured.  The  company  was  required  to 
supply  all  demands  for  gas  up  to  100,000  feet  per  day  for 
each  mile  of  street  piped  by  it,  except  as  to  extensions  laid 
under  the  special  order  of  the  city  council.  The  total  amount 
of  gas  which  the  company  could  be  required  to  furnish  was 
limited,  however,  to  36,000,000  cubic  feet  per  day.  The 
rates  were  fixed  in  this  ordinance  for  a  period  of  ten  years. 
The  price  for  natural  gas  was  to  be  31  cents  per  1000  cubic 
feet  both  to  the  city  and  to  private  consumers  with  a  reduc¬ 
tion  of  one  cent  per  1000  feet  upon  bills  paid  within  ten 
days  after  presentation.  The  price  for  manufactured  gas 
was  to  be  41  cents,  with  a  similar  discount,  and  if  manu¬ 
factured  and  natural  gases  were  mixed,  the  price  was  to  be 
fixed  between  31  cents  and  41  cents  according  to  the  propor¬ 
tions  of  the  mixture.  If  the  manufactured  gas  furnished 
should  be  of  less  than  600  heat  units  per  cubic  foot,  the 
price  charged  for  it  or  for  the  mixture  in  which  it  was  an 
element  was  to  be  correspondingly  lowered.  The  company 
agreed  to  establish  at  least  four  collection  stations  in  dis¬ 
tricts  to  be  designated  by  the  council. 

In  1907,  the  interests  controlling  the  two  companies  fur¬ 
nishing  artificial  gas  in  Cleveland  applied  for  a  natural  gas 
franchise.  The  negotiations  failed,  however,  because  of 
inability  to  reach  an  agreement  with  the  city  as  to  rates. 
The  applicants  for  the  franchise  insisted  on  a  rate  of  30 
cents  per  1000  cubic  feet,  while  the  city  held  out  for  rates 
ranging  from  20  cents  to  27  1-2  cents.  It  was  in  connection 
with  this  application  that  the  special  committee  of  the 
Chamber  of  Commerce  of  Cleveland  made  its  investigation 
and  report  to  which  reference  has  been  made  in  a  preceding 
section.1 

264.  Ten  per  cent  gross  receipts  tax  on  natural  gas  sold 
for  more  than  15  cents  per  1000  feet— Columbus,  Ohio. — A 

1  Ante ,  Seetion  249. 


606 


MUNICIPAL  FRANCHISES. 


franchise  for  the  supply  of  artificial  gas  was  granted  June 
27,  1892,  to  the  Columbus  Gas  Light  and  Coke  Company.1 
The  city  reserved  the  right  to  purchase  the  company’s 
works  and  all  the  appurtenances  belonging  thereto  “  at  any 
time  during  the  continuance  of  the  franchise.”  The  com¬ 
pany  agreed  to  pay  the  city  an  annual  lump  sum  of  $4,000 
and  to  sell  gas  for  the  first  ten  years  following  the  passage 
of  the  ordinance  at  a  price  not  exceeding  $1.10  per  1000 
cubic  feet,  with  a  discount  of  10  cents  per  1000  on  monthly 
bills  paid  before  the  15th  of  the  following  month.  The  gas 
was  to  be  of  at  least  16  candle  power. 

By  ordinances  approved  May  27,  1899,  August  1,  1899, 
and  April  4,  1900,  natural  gas  franchises  were  granted  to 
the  Federal  Gas  and  Fliel  Company.2  Under  the  first  two 
of  these  grants  the  company  was  authorized  to  supply  natural 
gas  for  fuel  for  public  or  private  use  in  the  buildings  or 
manufacturing  establishments  and  otherwise  in  the  city. 
Under  the  grant  of  1900,  the  company  was  authorized  to 
supply  either  natural  or  artificial  gas  to  he  used  for  fuel  or 
for  lighting  and  illuminating  purposes.  The  conditions  in 
all  of  these  grants  were  in  most  respects  the  same.  No  ex¬ 
cavation  was  to  he  made  for  laying  pipes  in  High  Street,  the 
principal  thoroughfare  of  the  city,  wherever  that  street  was 
paved  with  block-stone  or  asphalt  or  other  paving  material, 
except  when  necessar}^  to  cross  the  street.  Neither  were 
pipes  to  be  laid  in  other  paved  streets  except  where  necessary 
and  for  the  purpose  of  crossing.  Wherever  practicable,  the 
pipes  were  to  be  laid  in  alleys,  and  otherwise,  under  the 
sidewalks  inside  the  curbstone.  It  was  provided,  however, 
that  pipes  placed  under  sidewalks  should  consist  of  an  inner 
and  an  outer  pipe,  the  former  for  the  conveyance  of  gas,  the 
latter  to  be  ventilated  to  the  surface  of  the  street  by  pipes 
at  intervals  of  1000  feet.  The  company  was  required  to  fur¬ 
nish  to  the  proper  city  official,  plans  of  any  proposed  exca¬ 
vation  in  advance  of  making  it.  Under  the  second  franchise 
this  plan  was  subject  to  approval  or  amendment  by  the 
director  of  public  improvements.  There  were  the  usual 
provisions  for  care  in  street  work,  and  under  the  second 
franchise  it  was  stipulated  that  all  pipes,  mains  and  appara- 

Codifled  Ordinances,  p.  357. 

Record  of  Ordinances  No.  11,  City  of  Columbus,  pp.  822,  845,  423. 


NATURAL  GAS  FRANCHISES. 


607 


tus  used  by  the  company  should  be  “  of  the  most  approved 
material,  design  and  quality,”  and  all  pipes  used  were  to  be 
of  standard  weight.  The  usual  provisions  were  made  for  the 
indemnification  of  the  city  against  damages  resulting  from 
the  company’s  operations.  It  was  stipulated  that  the  pressure 
of  gas  in  the  pipes  within  the  city  limits  should  not  exceed 
ten  pounds  per  square  inch  unless  the  pipe  containing  gas 
at  any  higher  pressure  was  enclosed  in  a  larger  pipe  which 
should  be  ventilated  at  regular  intervals  of  300  yards  by 
pipes  passing  through  the  surface  of  the  street  out  into  the 
open  air.  Under  the  first  ordinance,  the  company  was  to 
bring  gas  to  the  corporate  limits  of  the  city  and  have  its  dis¬ 
tributing  pipes  laid  within  18  months,  “  unless  prevented 
by  order  of  the  Court,  strike  or  other  unavoidable  cause.” 
For  failure  to  comply  with  this  provision  the  city  council 
was  to  have  the  right  to  forfeit  the  franchise  after  giving 
the  company  thirty  days’  notice  of  its  intention  to  do  so. 
A  corresponding  provision  in  the  second  franchise  was  sub¬ 
stantially  the  same.  The  original  grant  was  for  a  term  of 
twenty-five  years.  In  the  first  two  grants  it  was  stipulated 
that  the  company  should  not  dispose  of  its  franchise  either 
directly  or  indirectly  to  any  person  or  corporation  interested 
in  supplying  natural  gas  to  the  people  of  Columbus.  In  the 
second  franchise  there  was  a  provision  that  the  company 
should  pay  into  the  public  treasury  ten  per  cent  of  all  monies 
received  from  the  sale  of  natural  gas  in  the  city  at  a  price 
exceeding  15  cents  per  1000  cubic  feet.  It  was  stipulated 
that  the  privileges  granted  by  the  second  ordinance  should 
not  be  forfeited  by  any  temporary  suspension  of  the  com¬ 
pany’s  operations  which  might  occur  after  the  pipes  had 
been  laid,  and  the  furnishing  of  gas  to  the  citizens  had  been 
commenced  unless  such  suspension  should  be  for  a  period 
of  six  months  or  more.  In  that  case,  the  city  council  would 
have  the  right  to  declare  the  franchise  forfeited.  It  was  also 
provided  in  the  second  grant  that  when  not  less  than  ten 
neighboring  householders  in  the  same  locality  of  400  feet 
square  and  on  the  same  street  should  file  a  written  request 
writh  the  company  for  gas  to  be  used  in  heating  their  respect¬ 
ive  houses  and  agree  to  take  gas  for  that  purpose  for  a  period 
of  five  years,  then  the  company  should  connect  the  property 
of  the  subscribers  with  the  gas  mains  and  supply  gas  to 


608 


MUNICIPAL  FRANCHISES. 


them.  Under  this  ordinance,  also,  the  city  was  to  have  the 
right  to  purchase  the  gas  mains  and  pipes  within  the  city 
limits  at  any  time.  In  case  the  company  and  the  city  could 
not  agree  upon  the  price  the  matter  was  to  be  referred  to 
arbitration,  and  both  parties  were  bound  “  to  abide  by  the 
findings  and  the  price  fixed  by  any  two  of  the  three  arbi¬ 
trators  It  was  stipulated,  however,  that  nothing  in  this 
ordinance  should  be  construed  as  preventing  the  city  from 
acquiring  the  company’s  property,  franchises  and  rights  by  the 
exercise  of  the  power  of  eminent  domain.  It  was  also  stipu¬ 
lated  in  this  second  franchise  that  the  company  might  cut 
off  the  gas  from  any  consumer  who  had  made  default  for  ten 
days  in  the  payment  of  his  gas  bill,  but  after  payment  had 
been  made  gas  was  to  be  furnished  again  to  such  consumer 
on  request.  A  special  provision  was  inserted  in  the  second 
franchise  to  the  effect  that  if  the  company  failed  to  lay  its 
mains  from  the  natural  gas  fields  to  the  city  line  or  failed  to 
deliver  at  that  point  a  flow  of  natural  gas  equal  to  6,000,000 
cubic  feet  per  24  hours  within  18  months  from,  the  date  of 
the  franchise,  the  company  was  to  forfeit  to  the  city  the  sum 
of  $50,000.  It  was  provided,  however,  that  if  the  company 
was  delayed  in  laying  its  mains  to  the  city  by  a  strike  or  by 
injunction  from,  a  court  of  competent  jurisdiction,  this  stipu¬ 
lated  period  should  be  extended  for  a  corresponding  length 
of  time.  It  was  also  stipulated  that  if  the  natural  gas  in 
the  Sugar  Grove  Natural  Gas  Field  should  become  exhausted 
before  the  expiration  of  the  eighteen-months  period,  then 
the  company  should  be  released  from  this  penalty.  Under 
both  the  first  and  the  second  ordinances  the  company  was 
required  to  give  an  indemnity  bond  of  $50,000.  This  bond, 
however,  was  separate  and  apart  from  the  penalty  just  de¬ 
scribed  under  the  second  franchise. 

By  an  ordinance  passed  July  1,  1901,  in  pursuance  of  its 
powers  granted  by  the  general  laws  of  Ohio,  the  city  of 
Columbus  fixed  the  price  of  natural  gas  for  the  ensuing  period 
of  ten  years  at  35  cents  per  1000  cubic  feet,  with  a  discount 
for  prompt  payment  of  15  cents  during  the  first  and  second 
years,  10  cents  during  the  third  and  fourth  years  and  5  cents 
during  the  remainder  of  the  ten-year  period.1  It  wras  or¬ 
dained  that  if  at  any  time  within  ten  years  from  the  date 

1  Record  of  Ordinances  No.  11,  p.  fi06. 


NATURAL  GAS  FRANCHISES. 


609 


of  this  ordinance  any  gas  company  should  be  unable  to  furnish 
natural  gas  for  fuel  by  reason  of  insufficient  quantity  to  supply 
the  demand,  and  if  such  company  should  devise  or  construct  a 
system  or  means  for  furnishing  fuel  gas  it  might  charge  a 
rate  not  to  exceed  60  cents  per  1000  feet,  with  a  10-cent 
discount  for  payment  within  ten  days  after  the  end  of  the 
month  in  which  the  gas  was  used.  This  rate  was  to  apply 
to  fuel  gas  only.  It  was  stipulated  that  if  there  was  a  differ¬ 
ence  of  opinion  between  the  city  council  and  the  company  as 
to  whether  or  not  the  company  was  unable  to  furnish  natural 
gas  as  required,  the  question  was  to  be  submitted  to  arbitra¬ 
tion.  The  ordinance  was  to  be  accepted,  and  by  accepting 
it  any  company  was  to  bind  itself  not  to  sell  natural  gas  or 
to  furnish  it  to  be  sold  in  any  other  city  or  town  outside  of 
Columbus,  except  the  towns  already  being  supplied,  until 
all  demands  for  gas  in  the  city  of  Columbus  were  supplied 
at  the  rates  fixed  in  the  ordinance.  This  agreement  was  to 
hold  good  even  though  higher  prices  were  offered  for  gas 
by  some  other  city  or  town.  The  company  was  to  be  per¬ 
mitted  to  sell  to  other  cities  only  such  gas  as  it  had  in  excess 
of  the  demand  in  Columbus. 

A  natural  gas  franchise  had  been  granted  on  February  4, 
1889,  to  the  Columbus  Natural  Gas  and  Fuel  Company,  but 
this  grant  had  no  important  provisions  that  were  not  con¬ 
tained  in  the  later  grants.1 

265.  Manufactured  gas  entirely  superseded -Kansas  City, 

Mo. — A  franchise  for  artificial  gas  was  passed  by  the  com¬ 
mon  council  of  Kansas  City  January  9,  1895.2  Another 
artificial  gas  franchise  was  passed  over  the  Mayor’s  veto  on 
August  24,  of  the  same  year.3  Both  of  these  franchises 
covered  by  express  provisions  all  of  the  streets  and  avenues 
of  the  city  “  as  the  boundaries  thereof  are  now  and  may 
hereafter  be.”  Both  franchises  were  for  a  period  of  thirty 
years.  Both  provided  for  22  candle-power  gas  to  be  fur¬ 
nished  for  public  and  private  consumption  at  a  price  not  to 
exceed  $1.10  per  1000  feet,  with  a  discount  of  10  cents  for 
prompt  payment.  Under  each  grant  the  city  was  to  receive 
semi-annual  payments  of  two  per  cent  on  the  gross  receipts 

1  Codified  Ordinances,  1806,  p.  853, 

*  Franchise  Ordinances  for  Public  Utilites,  op.  cit.  p.  2. 

*  Ibid.,  p.  10. 


610 


MUNICIPAL  FRANCHISES. 


of  the  grantees.  In  both  cases,  the  grantees  agreed  to  bid, 
when  requested,  for  an  annual  contract  for  supplying  gas  for 
the  street  lamps  at  a  rate  not  to  exceed  $12  per  annum  per 
lamp,  if  lighted  by  Philadelphia  or  moonlight  schedule,  or 
$18  per  annum  per  lamp  if  lighted  every  night  half  an  hour 
after  sunset  and  extinguished  one  hour  before  sunrise  the 
next  morning.  This  price  was  to  include  furnishing,  con¬ 
structing,  lighting,  extinguishing,  cleaning  and  repairing  the 
lamps.  The  grantees  were  to  extend  their  pipes  for  the  distri¬ 
bution  of  gas  on  graded  streets  to  be  named  by  ordinance 
wherever  at  least  six  consumers,  on  an  average,  for  every 
400  feet  of  extensions  would  first  agree  in  writing  to  take 
gas  for  a  period  of  at  least  one  year  at  the  general  rates. 
Each  tap  for  public  lighting  was  to  be  counted  as  one  con¬ 
sumer.  The  earlier  one  of  these  franchises  appears  to  have 
been  for  the  construction  of  a  new  gas  plant.  The  later  one 
was  for  the  acquisition  and  continued  operation  of  the  exist¬ 
ing  gas  works.  Under  the  former  the  grantees  were  required 
on  or  before  the  time  of  accepting  the  franchise  to  deposit 
$50,000  to  be  forfeited  to  the  city  unless  within  six  months 
thereafter  they  had  expended  $50,000,  and  within  three 
years  had  expended  $300,000  on  their  plant.  In  lieu  of  this 
deposit,  however,  the  grantees  might  furnish  a  bond  in  the 
sum  of  $75,000.  Under  the  earlier  grant  the  plant  was  to 
be  in  operation  within  eight  months  from  the  acceptance  of 
the  ordinance  unless  work  was  prevented  or  delayed  by  in¬ 
junctions  or  other  legal  proceedings.  It  was  stipulated  that 
prevention  by  injunction  proceedings  of  the  laying  of  pipes 
upon  any  street  or  of  the  construction  of  any  particular 
portion  of  the  works  was  not  to  be  construed  as  relieving  the 
grantees  from  constructing  other  portions  of  the  works 
within  the  required  period.  It  was  also  stipulated  that  in 
case  legal  proceedings  were  commenced  against  the  grantees 
by  which  any  particular  portion  of  their  work  was  prevented 
or  delayed,  they  were  immediately  upon  the  commencement 
of  such  proceedings  to  put  the  streets  which  had  been  dis¬ 
turbed  by  them  in  as  good  condition  for  travel  and  use  as  they 
had  been  in  before  the  commencement  of  the  company’s 
operations.  If,  however,  the  grantees  instigated  any  injunc¬ 
tions,  suits  or  other  legal  proceedings  against  themselves  for 
the  purpose  of  gaining  more  time  in  which  to  complete  their 


NATURAL  GAS  FRANCHISES. 


611 


work,  the  ordinance  and  all  amendments  to  it  were  to  become 
null  and  void.  Under  both  franchises  the  city  reserved  the 
right  to  purchase  such  portion  of  the  plant  and  property  at 
the  end  of  twelve  years  as  might  be  situated  within  the  city 
limits  or  adjacent  thereto,  upon  paying  its  actual  value.  In 
case  the  city  determined  to  exercise  this  option  and  was 
unable  to  agree  with  the  grantees  as  to  the  value  of  the  plant, 
such  value  was  to  be  ascertained  by  one  of  the  judges  of  the 
state  circuit  court  then  having  jurisdiction  within  the  city. 
The  petition  was  to  be  filed  by  the  city  with  the  circuit  court 
naming  one  of  the  judges  and  asking  him  to  proceed  to  value 
the  works.  In  performing  this  function  the  judge  was  to 
have  regard  only  to  the  actual  value  in  money  at  the  time  of 
making  the  estimate  “  of  the  lots  or  ground,  buildings, 
pipes,  lamps,  lamp-posts,  apparatus,  works  and  fixtures  ” 
of  the  grantees  or  other  property  of  every  kind  owned  or  con¬ 
trolled  and  used  by  them  and  necessary  to  the  manufacture 
and  distribution  of  gas.  It  was  expressly  stipulated  that 
the  value  of  the  unexpired  franchise,  the  value  of  the  capital 
stock  and  the  earning  capacity  of  the  gas  works  were  not  to 
be  taken  into  consideration  in  this  valuation.  Furthermore, 
no  consideration  was  to  be  given  to  damages  paid-  during 
construction,  attorneys’  fees,  interest  on  money  held  for  the 
construction  of  the  works,  or  the  expense  of  tearing  up  and 
replacing  pavements  in  streets  where  the  grantees  had  not 
been  compelled  actually  to  tear  up  and  replace  pavements. 
The  grantees  in  both  cases  were  required  to  maintain  a  com¬ 
plete  system  of  gas  works  and  not  to  encumber  it  with  liens 
beyond  the  reasonable  cost  of  such  system.  In  case  of  pur¬ 
chase  by  the  city,  the  plant  could  be  taken  over  at  the  city’s 
option  subject  to  the  encumbrances  upon  it,  the  amount  of 
which  were  to  be  deducted  from  the  appraised  valuation.  On 
the  other  hand,  if  the  city  chose  so  to  do  it  might  pay  the 
appraised  valuation  into  the  court  and  thereupon  acquire  title 
to  the  gas  works  free  and  clear  of  all  encumbrances.  In  such 
case,  after  payment  of  the  money  by  the  city,  the  liens  of  the 
encumbrances  would  exist  “  only  against  the  money  so  paid 
in  and  not  against  the  said  works  or  plant.”  After  the  ap¬ 
praisal  the  city  was  to  have  one  year  in  which  to  pay  for  the 
plant.  Under  the  terms  of  the  second  franchise  the  grantees 
were  required  within  75  days  after  their  acceptance  of  the 


612 


MUNICIPAL  FRANCHISES. 


ordinance  to  file  with  the  city  a  complete  statement  of  all 
the  pipes,  mains,  shut-offs,  lamps,  lamp-posts,  buildings  and 
appliances  of  every  kind  and  nature  included  in  their  exist¬ 
ing  plant.  This  statement  was  also  to  indicate  the  location 
of  the  various  items  of  property  enumerated.  In  both  cases 
the  grantees  were  forbidden  to  assign  their  rights  without 
the  city’s  consent  to  any  person  or  company  engaged  or  organ¬ 
ized  for  the  purpose  of  engaging  in  the  manufacture  or  sale 
of  gas  within  the  city  limits  under  any  other  ordinance  or 
franchise.  The  grantees  were  not  to  enter  into  any  com¬ 
bination  with  any  other  person  or  company  concerning  rates. 
It  was  expressly  stipulated  that  no  officers,  employees  or 
managers  of  a  gas  plant  provided  for  in  either  ordinance 
should  at  any  time  be  in  charge  of  or  be  an  employee  or 
manager  of  any  other  gas  works  manufacturing  or  selling 
gas  in  the  city.  The  grantees,  who  were  in  each  case  indi¬ 
viduals,  were  to  be  permitted  to  transfer  their  rights  to  com¬ 
panies  organized  by  them.  Under  both  ordinances  the  city 
reserved  the  right  to  appoint  one  or  more  gas  inspectors  and 
to  prescribe  their  duties  by  ordinance.  These  inspectors  were 
to  enforce  the  provisions  of  the  franchise  in  regard  to  candle- 
power  and  quality  of  gas,  its  correct  measurement  and  the 
proper  pressure  at  which  it  should  be  delivered  so  as  to  pro¬ 
duce  “  the  best  obtainable  light  with  the  least  consumption 
of  gas.”  The  cost  of  this  inspection,  aside  from  the  salaries 
of  the  inspectors,  was  to  be  paid  by  the  companies. 

The  supply  of  gas  under  the  ordinances  just  described 
has  been  entirely  superseded  by  the  supply  of  natural  gas 
under  a  franchise  granted  September  27,  1906  for  a  period  of 
thirty  years.1  Under  this  franchise,  the  grantees  agreed  to 
be  ready  by  January  1,  1907,  to  furnish  natural  gas  on  not 
less  than  75  miles  of  mains  to  all  consumers,  and  not  later 
than  March  1,  1907,  to  be  supplying  gas  on  not  less  than  50 
miles  of  additional  mains,  and  by  August  1,  1907  to  be  fur¬ 
nishing  gas  to  “  all  present  consumers  on  the  lines  of  the 
Kansas  City  Missouri  Gas  Company.”  The  grantees  were 
to  file  their  written  acceptance  of  the  ordinance  within  ten 
days  and  deposit  at  the  same  time  a  fund  of  $50,000  in  cash 
which  would  be  forfeited  to  the  city  unless  the  requirements 
just  described  were  fulfilled.  The  grantees  were  also  to 

1  Franchise  Ordinances ,  etc.,  op.  cit .,  p.  19. 


NATURAL  GAS  FRANCHISES. 


613 


file  within  twenty  days  after  their  acceptance  of  the  ordinance 
a  bond  in  the  sum  of  $250,000  to  be  paid  to  the  city  as  liqui¬ 
dated  damages  if  they  failed  to  have  the  amount  of  work 
done  that  was  required  of  them  on  March  1  and  August  1, 
1907.  It  was  provided,  however,  that  if  the  commencement 
of  the  work  or  the  laying  of  the  pipes  either  inside  or  out¬ 
side  of  the  city  or  the  delivery  of  natural  gas  at  or  within 
the  city  limits  should  be  prevented,  hindered  or  delayed  by 
injunction  or  legal  proceedings  “  or  by  inclement  days  or  by 
labor  strikes  ”  or  by  any  cause  beyond  their  control,  or  if 
the  acquisition  by  the  grantees  of  the  ownership  or  control 
of  the  pipes  and  property  of  the  Kansas  City  Missouri  Gas 
Company  should  be  hindered  or  delayed  by  legal  proceedings, 
the  time  lost  in  such  manner  should  not  be  reckoned  in 
estimating  the  grantees’  time  allowance;  but  it  was  provided 
that  no  such  delay  should  be  excused  or  the  grantees’  time 
extended  if  they  could  by  the  excercise  of  reasonable  diligence 
and  at  reasonable  expense  “  obtain  natural  gas  elsewhere.” 
It  was  stipulated  that  the  grantees  should  at  all  times  keep 
and  maintain  in  all  places  where  gas  was  to  be  furnished  such 
pressure  as  might  be  required  by  ordinance,  but  the  pressure 
so  required  was  to  be  “  reasonable  and  practicable.”  Exten¬ 
sions  of  mains  were  to  be  made  by  the  grantees  wherever  re¬ 
quired  by  ordinance  in  case  at  least  three  consumers,  on  an 
average,  for  each  200  feet  should  agree  in  advance  to  take 
gas  for  a  period  of  not  less  than  a  year  at  the  general  rates, 
but  whenever  a  graded  street  was  about  to  be  paved  the 
grantees  were  to  make  extensions  of  their  pipes,  including  the 
connections  to  the  curb  where  buildings  were  already  located, 
in  advance  of  the  paving  without  regard  to  the  number  of 
consumers  along  the  line.  For  failure  to  comply  with  the 
ordinance  requiring  extensions  on  petition  of  the  required 
number  of  consumers,  the  grantees  were  to  pay  $5  a  day 
to  the  city  as  long  as  their  failure  or  refusal  to  make  an 
extension  should  continue.  The  right  wa3  given  to  shut  off 
gas  from  any  consumer  who  was  in  arrears  for  a  longer 
period  than  15  days,  but  the  delinquent  consumer  could 
“  reinstate  his  right  to  obtain  gas  on  payment  of  the  bill  and 
shutting-off  charge  of  fifty  cents  Inspection  of  meters, 
pressure  and  other  matters  concerning  the  supply  of  gas 
were  to  be  provided  for  by  the  city  at  the  company’s  ex- 


614 


MUNICIPAL  FRANCHISES. 


pense.  The  maximum  rate  agreed  upon  for  the  period  of  five 
years  immediately  following  the  introduction  of  natural  gas 
was  25  cents  per  1000  cubic  feet.  For  the  second  period  of 
five  years  the  rate  was  fixed  at  27  cents  and  for  the  remain¬ 
ing  period  of  the  grant  at  30  cents.  The  grantees  were  au¬ 
thorized  also  to  make  special  contracts  with  consumers  at 
less  than  the  rate  in  force  at  the  time.  Such  contracts  were 
to  be  based  upon  the  amount  of  gas  used,  and  the  conditions 
of  the  contract  and  special  rates  were  to  be  the  same  to  all 
consumers  using  the  same  amount  under  the  same  contract 
conditions.  Schedules  of  special  rates  and  contract  condi¬ 
tions  were  to  be  filed  with  the  city  clerk  from  time  to  time 
and  were  to  be  open  to  the  city’s  inspection.  It  was  agreed 
that  the  grantees  should  make  special  contracts  “  at  as  low 
rates  as  those  at  which  natural  gas  is  sold  at  the  time  to 
any  consumers  of  the  same  class  using  the  same  amount  of 
gas  under  the  same  contract  conditions  who  are  located  ap¬ 
proximately  as  distant  from  the  fields  from  which  they  are 
at  the  time  supplied  as  Kansas  City,  Missouri,  is  from  the 
field  from  which  it  is  at  the  time  supplied,  and  who  are  sup¬ 
plied  by  the  grantees,  or  anyone  from  whom  the  grantees 
obtain  their  supply,  or  anyone  whose  supply  is  obtained  from 
those  from  whom  the  grantees  obtain  their  supply  ”,  but 
the  requirement  to  make  special  contracts  at  the  rates  de¬ 
scribed  was  not  to  be  construed  as  compelling  the  grantees  to 
offer  as  low  rates  as  might  be  in  effect  at  the  time  in  the 
locality  where  the  grantees  or  those  from  whom  they  ob¬ 
tained  their  supply  or  anyone  else  who  obtained  his  supply 
from  the  same  source  should  be  in  bona  fide  competition 
with  any  other  supplier  of  natural  gas  in  the  same  locality. 
It  was  also  stipulated  that  if  the  demand  from  special  rate 
consumers  should  threaten  the  general  supply  the  grantees 
might  shut  off  the  supply  in  whole  or  in  part  from  all  its 
patrons  other  than  domestic  consumers.  The  grantees  were 
authorized  to  add  ten  per  cent  to  the  bills  of  all  consumers 
who  were  in  arrears  for  more  than  ten  days.  They  were  also 
authorized  to  collect  a  minimum  of  50  cents  per  month  from 
any  person  who  had  a  meter  installed.  TTnder  the  franchise, 
natural  gas  was  to  be  furnished  for  illuminating,  heating 
and  mechanical  purposes  and  was  to  be  at  all  times  of  the 
same  character  and  quality  as  when  it  came  from  the  earth 


NATURAL  GAS  FRANCHISES. 


615 


and  not  to  be  mixed  with  air  or  otherwise  adulterated.  If 
the  reasonably  accessible  supply  of  natural  gas  should  at  any 
time  be  inadequate  to  warrant  the  grantees  to  continue  to 
operate  under  the  terms  of  the  franchise  and  the  common 
council  should  find  this  to  be  a  fact,  the  grantees  would  be 
under  obligation  thereupon  to  make  and  furnish  manufactured 
gas  to  the  city  under  the  terms  of  the  artificial  gas  franchises 
granted  in  1895  which  have  already  been  described,  until  the 
expiration  of  those  franchises.  The  rates  fixed  in  those  fran¬ 
chises,  however,  were  not  to  control,  but  the  question  of 
rates  was  to  be  determined  by  arbitration  in  case  the  city  and 
the  company  could  not  agree  upon  the  matter.  The  arbi¬ 
trators  were  to  be  three  judges  of  the  Circuit  Court  of  Jack- 
son  County,  one  selected  by  the  city,  one  by  the  grantees  and 
the  third  by  the  first  two.  The  grantees  agreed  to  pay  the 
city  two  per  cent  of  their  gross  receipts,  and  the  city  re¬ 
served  the  right  to  examine  their  books  to  determine  the 
correctness  of  any  reports  made  by  them  relative  to  gross 
earnings.  It  was  provided  that  for  any  violation  of  the 
ordinance  or  failure  to  do  any  act  required  by  it  the  grantees 
should  forfeit  their  franchise,  on  condition  that  their  fail¬ 
ure  should  continue  unrectified  for  sixty  days  after  written 
notice  from  the  city.  As  long  as  the  natural  gas  held  out 
the  grantees  were  to  furnish  free  of  charge  sufficient  gas  to 
light  all  the  city  buildings  on  condition  that  the  lights  should 
be  kept  extinguished  when  not  needed  for  illuminating  pur¬ 
poses.  The  grantees  were  authorized  to  acquire  by  purchase, 
lease  or  otherwise,  the  pipes  and  property  of  the  company 
then  supplying  artificial  gas  in  the  city,  but  no  such  acquisi¬ 
tion  was  to  interfere  with  the  city’s  reserved  right  to  pur¬ 
chase  the  plant,  and  it  was  expressly  stipulated  that  this  right 
of  purchase  should  also  apply  to  the  pipes  and  property  of  the 
grantees  under  this  franchise.  It  was  expressly  stated  that 
the  contract  of  the  grantees  for  gas  supply  was  with  the  Kaw 
Gas  Company  and  the  Kansas  City  Pipe  Line  Company,  and 
it  was  agreed  that  the  division  of  gross  income  received  from 
gas  between  the  distributing  company  and  the  supply  com¬ 
panies  after  the  expiration  of  two  years  from  the  introduction 
of  natural  gas  into  Kansas  City,  should  be  in  the  proportion 
of  three-eights  to  the  distributing  company  and  five-eights 
to  the  supply  companies.  The  grantees  expressly  covenanted 


61 6 


MUNICIPAL  FRANCHISES. 


that  the  terms  of  this  contract  agreement  with  the  supply 
companies  should  not  be  changed  without  the  formal  consent 
of  the  city.  They  also  agreed  that  if  the  city  should  acquire 
the  plant  and  property,  they  would  transfer  to  it  free  of  cost 
their  rights  under  their  contract  with  the  supply  companies. 
The  grantees  also  agreed  to  procure  from  the  supply  com¬ 
panies  and  file  with  the  City  Clerk  within  ninety  days  after 
the  passage  of  the  franchise  a  written  agreement  to  the 
effect  that  if  the  city  should  acquire  the  plant,  the  supply 
companies  would  upon  demand  continue  to  furnish  gas  dur¬ 
ing  the  remainder  of  the  franchise-period  upon  the  same 
terms  upon  which  they  had  agreed  to  furnish  it  to  the 
grantees.  The  city,  on  the  other  hand,  agreed  not  to  exer¬ 
cise  its  option  of  purchase  for  a  period  of  ten  years  unless 
before  the  expiration  of  that  time  the  grantees  had  ceased 
to  furnish  natural  gas.  It  was  expressly  agreed  by  the 
grantees  that  as  long  as  they  continued  to  supply  natural 
gas  they  would  bid  annually  for  the  street  lighting  contract 
at  a  price  not  to  exceed  $9  per  lamp,  including  gas,  repair 
and  maintenance,  and  that  they  would  set  such  additional 
street  lamp-posts  as  the  council  might  demand  and  connect 
them  with  the  mains,  and  furnish,  repair  and  maintain  them 
for  a  price,  including  gas,  of  not  more  than  $12  each  per 
annum.  The  city  reserved  the  option,  however,  to  require 
the  grantees,  in  lieu  of  such  bidding,  to  furnish  gas  alone 
for  the  existing  street  lamps  free,  and  also  for  any  addi¬ 
tional  lamp  posts  that  might  be  set  by  the  city  at  the  rate  of 
100  lamps  for  each  8000  inhabitants  above  200,000.  The 
population  for  the  purpose  was  to  be  calculated  on  the  basis 
of  two  and  one-half  times  the  number  of  names  in  the  city 
directory  of  the  largest  circulation,  including  the  names  of 
business  firms.  If  the  city  should  elect  to  take  natural  gas 
free  and  itself  furnish  or  contract  with  others  for  furnishing 
an  incandescent  equipment  for  the  maintenance  of  the  lamps, 
it  was  to  have  the  right  to  use  the  posts  owmed  and  set  by 
the  grantees  not  less  in  number  than  those  which  at  the  time 
had  been  set  by  the  Kansas  City  Missouri  Gas  Company. 
Moreover,  the  city  agreed  that  the  lights  should  be  kept  ex¬ 
tinguished  between  sunrise  and  sunset.  The  grantees  were 
prohibited,  except  as  otherwise  provided  in  the  ordinance 
und  except  with  the  formal  consent  of  the  city,  from  selling. 


NATURAL  GAS  FRANCHISES. 


617 


leasing  or  transferring  their  plant  or  privileges  to  any  person 
engaged  or  about  to  engage  in  the  manufacture  or  sale  of  gas 
in  the  city  under  any  other  ordinance.  The  grantees,  more¬ 
over,  were  not,  without  such  consent,  to  enter  into  any  com¬ 
bination  with  any  other  person  or  company  concerning  the 
price  to  be  charged  for  gas ;  and  it  was  stipulated  that  no 
officer,  employee  or  manager  of  the  grantees’  gas  plant  was 
to  be  at  the  same  time  connected  with  any  other  gas  works 
in  the  city.  The  grantees  were  authorized,  however,  to  trans¬ 
fer  their  rights  to  a  corporation  to  be  organized  by  them, 
but  notice  of  such  transfer  or  of  any  later  transfers  was  to 
be  filed  with  the  city  clerk  within  ten  days  of  the  execution 
of  the  transfer.  It  was  provided,  however,  that  the  grantees 
should  have  a  “  full,  complete  and  unqualified  right  to  assign 
and  transfer  and  convey  this  franchise  and  their  property,  by 
way  of  mortgage,  deed  of  trust  or  other  form  of  security  in 
the  nature  of  a  mortgage  or  deed  of  trust,  for  the  purpose  of 
securing  Iona  fide  indebtedness,  and  for  the  purpose  of  ac¬ 
quiring  property  and  of  raising  funds  to  provide,  build,  con¬ 
struct,  equip  and  operate  said  plant,  and  to  conduct  the  busi¬ 
ness  thereunder.”  The  grantees  bound  themselves,  as  a  mat¬ 
ter  of  contract,  to  obey  the  laws  of  the  state  and  the  ordi¬ 
nances  of  the  city  “now  in  existence  or  hereafter  passed,  in 
prohibition  of  mergers,  consolidations  and  pooling.”  The  city 
expressly  reserved  the  right  to  own  or  operate  a  plant  or 
plants  for  supplying  itself  and  its  inhabitants  with  either 
natural  or  artificial  gas  for  lighting,  heating  and  manu¬ 
facturing  purposes,  and  also  reserved  the  right  to  own  and 
operate  a  plant  or  plants  for  supplying  any  other  sort  of 
light.  “  It  being  the  purpose  to  safeguard  and  make  sure 
that  there  may  always  be  competition  in  the  matter  of  sup¬ 
plying  gas  and  that  gas  will  be  supplied  within  the  city,” 
says  the  ordinance,  “  the  grantees  and  assigns  agree  that  any 
action  on  their  part  impairing  or  limiting  or  preventing  such 
competition,  or  any  substantial  or  continued  failure  for  a 
period  of  sixty  days  to  furnish  gas  in  compliance  with  the 
provisions  of  this  ordinance,  shall  constitute  a  violation  of 
this  ordinance,  and  the  city  shall  have  the  right  to  repeal 
this  ordinance  by  ordinance,  and  shall  have  the  right  to  pur¬ 
chase  the  plant”  under  the  same  terms  and  conditions  pre¬ 
scribed  in  the  gas  ordinance  passed  August  24,  1895. 


618 


MUNICIPAL  FRANCHISES. 


Under  the  provisions  of  this  iron-clad  ordinance,  natural 
gas  is  now  being  furnished  exclusively  in  Kansas  City.  It  is 
said  that  during  the  winter  of  1908  and  1909,  when  the 
temperature  fell  to  zero  for  a  day  or  two,  the  pressure  in  the 
natural  gas  mains  proved  inadequate  to  supply  the  sudden 
increase  in  the  demand  for  fuel  and  that  in  the  portions  of 
the  city  farthest  removed  from  the  point  where  the  pipe  lines 
entered,  the  pressure  failed  entirely.1  At  the  time  of  this  in¬ 
vestigation  the  gas  was  being  brought  by  two  16-inch  mains 
from  the  fields  of  Southern  Kansas.  The  experience  of  the 
winter  demonstrated  that  the  supply  company,  over  which 
the  city  had  no  direct  control,  would  have  to  lay  additional 
pipe  lines  if  the  people  of  Kansas  City  were  to  be  supplied 
under  conditions  that  would  he  safe  for  all  emergencies  of 
the  weather. 

266.  Division  of  net  earnings  with  city— Topeka,  Kansas. 

— A  franchise  was  granted  August  18,  1903,  by  the  city  of 
Topeka,  to  the  Continental  Oil  and  Gas  Company  for  a  term 
of  twenty  years  for  the  purpose  of  furnishing  natural  gas.2 
The  pipes  were  to  be  not  less  than  fifteen  inches  beneath  the 
surface  of  the  earth  when  laid  in  travelled  streets  and  not 
less  than  six  feet  from  the  curb  line.  The  expense  of  service 
pipes  was  to  be  divided  between  the  company  and  the  con¬ 
sumers,  the  point  of  division  being  at  the  curb  line.  The 
company  -was  required  to  furnish  the  city  free  of  charge 
sufficient  gas  for  light  and  heat  for  one  building  containing 
a  council  chamber  and  office  room  for  the  transaction  of  the 
city’s  business,  and  for  one  auditorium.  For  incandescent 
street  lights,  the  city  was  to  pay  not  more  than  50  cents  each 
per  month,  the  city  to  furnish  the  burners  and  lamp  posts 
and  provide  at  its  own  expense  for  repair  and  maintenance 
and  for  lighting  and  extinguishing  the  lights.  These  street 
lights. were  not  to  burn  more  than  twelve  hours  in  any  twenty- 
four.  The  company  agreed  to  furnish  not  less  than  10,000,- 
000  cubic  feet  of  natural  gas  in  every  thirty  days.  On  Sep¬ 
tember  8,  1904,  the  council  adopted  an  amendment  requiring 
the  company  to  commence  operations  by  March  1,  1905,  and 
to  complete  the  laying  of  mains  and  be  ready  to  furnish  gas 
in  the  principal  parts  of  the  city  within  three  years.  The 

1  See  article  by  S.  M.  Reynolds,  in  Baltimore  Neivs,  May  24,  1909. 

2  Revised  Ordinances,  City  of  Topeka,  1905,  p.  208. 


NATURAL  GAS  FRANCHISES. 


619 


company  was  also  required  to  deposit  with  the  city  treasury 
the  sum  of  $1,000  as  a  guarantee  that  its  plant  would  be  con¬ 
structed  according  to  its  franchise. 

On  September  9,  1904,  a  franchise  was  granted  to  the 
Excelsior  Coke  and  Gas  Company  for  supplying  artificial  or 
manufactured  gas  for  a  period  of  thirty  years.1  Under  this 
grant,  the  company  was  limited  to  a  charge  of  $1.25  per  1000 
cubic  feet  for  gas  furnished  to  the  city  or  to  private  con¬ 
sumers.  It  was  also  provided  that  whenever  the  sale  of  gas 
in  any  one  year  should  reach  200,000,000  feet,  the  price  of 
gas  for  the  following  year  should  be  reduced  to  $1.20;  and 
that  when  the  sales  reached  the  amount  of  400,000,000  feet 
a  year,  the  price  for  the  following  year  should  be  $1.10;  and 
when  the  sales  reached  800,000,000  cubic  feet  a  year,  the 
price  thereafter  should  be  limited  to  $1.00.  It  was  also  pro¬ 
vided  that  the  company  should  not  at  any  time  charge  the 
city  a  higher  rate  for  gas  than  the  lowest  current  rate  charged 
any  of  its  customers.  The  company  was  required  to  file  semi¬ 
annual  statements  with  the  city  clerk  showing  the  cost  of 
improvements  made  during  the  preceding  six  months,  the 
amount  of  gas  manufactured  and  the  amount  sold,  the 
amount  and  cost  of  fuel  used,  the  amount  of  by-products 
produced,  the  disposition  of  them,  the  number  of  miles  of 
mains  and  meters  in  use,  the  total  amount  of  capital  invested 
in  the  plant  and  the  total  receipts  and  expenditures.  It  was 
also  stipulated  that  the  company  should  pay  annually  into 
the  city  treasury  ten  per  cent  of  its  net  earnings  over  and 
above  ten  per  cent  earned  on  its  investment.  During  the 
life  of  the  franchise,  the  common  council  was  to  have  the  right 
by  ordinance  to  fix  a  reasonable  schedule  of  maximum  rates, 
on  condition  that  it  should  at  no  time  fix  a  rate  that  would 
prohibit  the  company  from  earning  at  least  ten  per  cent  on 
its  capital  invested  in  the  city  over  and  above  reasonable 
operating  expenses  for  maintenance  and  taxes. 

At  the  termination  of  the  franchise  period,  the  city  was 
authorized  to  acquire  the  plant  and  property  pertaining  to 
it.  If  the  city  desired  to  take  advantage  of  its  option,  it  was 
to  file  a  petition  in  the  District  Court  of  Shawnee  County 
giving  a  general  description  of  the  plant  or  property,  setting 
forth  the  interest  or  property  rights  of  the  company  or  others 

*  Revised  Ordinances,  op.  cit.,  p.  223. 


620 


MUNICIPAL  FRANCHISES. 


in  the  plant,  and  praying  that  it  be  permitted  to  acquire  title 
to  the  property  under  the  general  laws  of  the  state.  It  was 
stipulated  that  thirty  days  notice  should  be  given  to  all  per¬ 
sons  interested  in  the  property  by  publication  in  three  suc¬ 
cessive  issues  of  some  weekly  newspaper  in  the  city  having 
general  circulation.  Notice  was  also  to  be  served  upon  the 
manager  in  charge  of  the  company’s  property  if  he  could  be 
found  in  the  county.  Thereupon  the  property  was  to  be 
appraised  as  provided  by  law.  Under  the  general  law  in  re¬ 
gard  to  this  subject,  the  appraisal  was  to  be  made  by  three 
disinterested  commissioners,  non-residents  of  the  city,  one,  an 
expert  engineer,  to  be  appointed  by  the  Court;  one  to  be 
appointed  by  the  city,  and  one  by  the  company.1  The  com¬ 
missioners  so  appointed,  after  being  sworn  to  the  faithful 
and  impartial  discharge  of  their  duties,  were  to  proceed  im¬ 
mediately  to  determine  a  fair  value  of  the  plant.  The  com¬ 
missioners  were  to  have  power  to  administer  oaths,  compel  the 
attendance  of  witnesses  and  the  production  of  books  and 
papers;  and  any  citizen,  taxpayer  or  officer  of  the  city  was 
authorized  to  appear  before  them  and  be  heard  as  to  the  city’s 
interest.  They  were  to  report  within  thirty  days  after  their 
appointment  unless  for  good  cause  shown  the  time  was  ex¬ 
tended  by  the  court.  Within  ten  days  after  the  filing  of  the 
report  any  citizen  or  other  person  interested  might  file  ex¬ 
ceptions  to  it  and  thereupon  the  court  was  to  appoint  a  time, 
not  more  than  thirty  days  from  the  filing  of  the  report,  for 
a  hearing  at  which  the  exceptions  were  to  be  heard  in  a  sum¬ 
mary  manner  without  pleading,  and  the  court  was  authorized 
either  to  confirm  the  report  or  to  set  it  aside  and  appoint 
new  commissioners.  The  city  was  to  pay  the  commissioners 
of  appraisal  $3  a  day  for  their  services.  At  any  time  within 
four  months  after  the  district  court  had  confirmed  the  award 
of  the  commissioners,  the  city  might  deposit  the  amount  of 
the  award  with  the  county  treasurer  for  the  use  of  the  com¬ 
pany  owning  the  plant  and  thereupon  become  the  absolute 
owner  of  all  privileges,  property  and  property  rights  of  the 
company  and  of  all  others  in  any  way  interested  in  the  plant 
“  free  and  clear  of  the  claims  of  all  persons  theretofore  in¬ 
terested  therein.”  The  determination  of  the  proper  disposi¬ 
tion  of  the  money  paid  by  the  city  with  reference  to  the  rights 

1  Laws  of  Kansas,  1903,  chapter  122. 


NATURAL  GAS  FRANCHISES. 


621 


of  incumbrancers,  owners  and  others  interested  in  the  plant, 
was  to  be  left  with  the  court. 

Under  the  terms  of  its  franchise  the  company  agreed  to 
improve  its  gas  plant,  increase  its  capital  and  extend  its 
mains  and  services  so  as  to  furnish  the  portions  of  the  city 
not  then  supplied.  Service  pipes  and  meters  were  to  be  put 
in  free  of  charge  to  consumers.  Improvements  and  exten¬ 
sions  costing  at  least  $175,000  were  to  be  made  within 
twenty-one  months  from  the  date  of  the  franchise.  This 
grant  was  expressly  limited  to  artificial  gas.  This  franchise 
was  vetoed  by  the  mayor,  but  passed  over  his  veto  by  the 
common  council. 

On  May  4,  1905,  another  ordinance  was  passed  authorizing 
this  company  to  lease  its  plant  to  the  Consumers  Light, 
Heat  and  Power  Company,  which  had  in  the  meantime  taken 
over  the  franchises  of  the  Continental  Oil  and  Gas  Company 
for  furnishing  natural  gas.1  Under  this  ordinance,  the  sup¬ 
ply  of  natural  gas  was  to  be  furnished  on  or  before  January 
1,  1906.  This  ordinance  required  that  in  case  of  insufficient 
supply  of  natural  gas,  the  artificial  gas  company  should  im¬ 
mediately  resume  the  supply  of  manufactured  gas  under  its 
franchise. 

267.  Artificial  gas  for  lighting  supplied  by  the  city  and 
natural  gas  for  fuel  supplied  by  companies— Wheeling. — An 

exclusive  franchise  was  granted  to  a  private  company  as 
early  as  1850  for  supplying  gas  to  the  city  of  Wheel¬ 
ing.2  The  grant  was  for  a  period  of  thirty  years  with  the 
right  on  the  part  of  the  city  to  purchase  the  plant  after  the 
expiration  of  twenty  years  at  a  price  to  be  fixed  by  arbitra¬ 
tion,  the  value  of  the  franchise  and  good-will  being  excluded 
from  consideration.  For  several  years  the  company  charged 
the  maximum  statutory  price  of  $3.50  per  1000  feet  to  private 
consumers.  About  1859  the  consumers  held  an  indignation 
meeting,  however,  and  many  of  them  entered  into  an  agree¬ 
ment  to  discontinue  the  use  of  gas.  The  company  thereupon 
made  a  concession  to  the  extent  of  granting  a  ten  per  cent 
discount  from  the  established  rate  for  prompt  payment.  The 
dividends  paid  by  the  company  for  fifteen  years  prior  to  1870 
were  from  12  per  cent  to  24  per  cent  per  annum.  The  city 

1  Revised  Ordinances,  op.  cit.,  p  229. 

*  See  National  Civic  Federation  Report,  1907,  op.  cit.,  pp.  427,  429. 


622 


MUNICIPAL  FRANCHISES. 


took  over  the  plant  under  its  option  at  the  expiration  of  the 
twenty-year  period,  and  has  been  operating  it  ever  since. 

The  city  of  Wheeling  has,  however,  granted  four  different 
gas  franchises  to  private  companies.1  Each  of  these  fran¬ 
chises,  however,  forbids  the  supply  of  gas  for  lighting  pur¬ 
poses.  Two  of  the  franchises  granted  in  1886  and  1888 
were  to  associations  of  manufacturers  and  merchants,  who 
were  permitted  to  supply  gas  to  their  members  only.  The 
franchise  of  the  Natural  Gas  Company  of  West  Virginia, 
granted  April  17,  1885,  was  unlimited  in  duration,  and  was 
in  specific  terms  exclusive  and  for  the  whole  area  of  the  city. 
The  franchise  granted  to  the  Virginia  Oil  and  Gas  Company 
on  July  15,  1904,  was  for  a  period  of  fifty  years,  and  was  by 
its  express  terms  non-exclusive.  The  exclusive  feature  of  the 
earlier  grant  is  believed  to  have  been  invalid.  The  Natural 
Gas  Company  of  West  Virginia  was  permitted  by  an  amend¬ 
ment  of  its  franchise  in  1896  to  increase  the  price  of  gas  from 
15  cents  to  20  cents  per  1000  cubic  feet,  with  a  discount  of 
2  cents  for  payment  of  bills  within  ten  days.  The  Virginia 
Oil  and  Gas  Company  carries  its  gas  through  Wheeling,  but 
has  never  attempted  to  supply  gas  to  private  consumers 
within  the  city  limits.  The  city  reserved  the  right  to  pur¬ 
chase  the  Natural  Gas  Company’s  plant  after  twenty  years, 
or  at  the  end  of  any  five-year  period  thereafter.  The  price 
was  to  be  fixed  by  arbitration,  and  the  arbitrators  were  to 
have  regard  only  to  “  the  then  actual  value  of  the  property 
and  rights  to  be  purchased,”  excepting  that  the  gas  wells 
were  to  be  figured  in  at  their  original  cost  to  the  company. 
The  arbitrators  were  not  to  consider  the  value  of  the  com¬ 
pany’s  franchises,  or  grants  of  privileges  from  any  public 
authority,  or  the  dividends  or  profits  accruing  to  the  stock¬ 
holders.  No  method  was  provided,  however,  by  which  the 
city  should  have  knowledge  and  control  of  the  company’s  ac¬ 
counts.  The  Natural  Gas  Company,  by  the  terms  of  its 
franchise,  agreed  to  furnish  free  all  the  gas  needed  for  any 
public  building,  public  school  or  public  works  adjacent  to  the 
company’s  pipes.  The  Virginia  Oil  and  Gas  Company, 
whose  rate  to  private  consumers  was  limited  to  19  cents  with 
a  discount  of  2  cents,  for  prompt  payment,  was  required 
under  its  franchise  to  furnish  gas  free  for  heating  purposes 

1  National  Civic  Federation  Report,  op.  cit pp.  459  to  489. 


NATURAL  GAS  FRANCHISES. 


623 


at  the  city  buildings  and  at  hose-houses  adjacent  to  its  mains. 
This  company  was  also  to  furnish  gas  needed  for  heating  pur¬ 
poses  at  two  hospitals;  and  gas  used  for  heating  purposes  at 
the  municipal  gas  plant  and  at  the  city  water  works  was  to  be 
furnished  at  10  cents  per  1000  feet  net.  The  National  Civic 
Federation  investigator  stated  in  1907  that  with  the  city 
charging  75  cents  for  gas  for  lighting  purposes  furnished  by 
a  municipal  plant  and  giving  a  limited  and  poor  service  with 
inadequate  pressure,  it  had  been  found  practically  impossi¬ 
ble  to  prevent  the  citizens  from  using  natural  gas  furnished 
by  a  private  company  at  18  cents  per  1000  feet  for  illumi¬ 
nating  as  well  as  for  fuel  purposes. 

268.  Partnership  versus  control— Baltimore. — The  first 
municipal  gas  franchise  granted  in  the  United  States  was,  so 
far  as  known,  an  ordinance  passed  by  the  city  council  of 
Baltimore,  June  17,  1816,  authorizing  the  Gas  Light  Com¬ 
pany  of  Baltimore  to  lay  its  pipes  under  the  streets  of  that 
city.1  This  franchise  was  not  limited  as  to  time.  Among 
other  things,  it  provided  that  with  the  approval  of  the  Mayor 
and  the  consent  of  the  owners  and  occupiers  of  houses  front¬ 
ing  upon  or  adjacent  to  any  street  or  avenue,  the  company 
might  attach  its  lamps,  pipes  or  other  apparatus  “  to  any  ..part 
of  any  such  house,  or  houses,  upon  such  terms  as  may  be 
agreed  upon  by  and  between  said  company  and  the  owner  or 
occupier  of  any  such  house  or  houses  ”.  This  company  was 
granted  a  special  legislative  charter  during  the  same  year, 
under  which  it  was  authorized  to  manufacture,  procure  or 
collect  “gas  or  inflammable  air”,  and  preserve,  use  and  dis¬ 
tribute  it  as  a  means  of  giving  light  or  for  any  other  useful 
purpose,  or  for  lighting  the  streets  and  public  places  and 
houses  and  other  buildings  in  the  city  and  precincts  of  Balti¬ 
more  or  elsewhere  in  the  State  of  Maryland.2  The  rights 
and  privileges  granted  by  the  city  in  the  franchise  ordinance 
already  mentioned  were  expressly  confirmed  by  this  act. 

Contracts  for  public  lighting  were  entered  into  from  time 
to  time  between  this  company  and  the  city  of  Baltimore. 
Of  particular  interest  is  the  contract  ordinance  of  May  3, 
1859,  under  which  the  company  agreed  to  “lay  mains  on 
streets  to  be  designated  by  ordinance  or  resolution  in  the 


1  Public  Service  Corporations  of  Baltimore.,  op.  cit.,  p.  626. 
*  Ibid ,  p.  620. 


624 


MUNICIPAL  FRANCHISES. 


future,  at  a  cost  not  to  exceed  $10,000  in  any  one  year.’’ 1 
On  the  other  hand,  the  city  pledged  its  credit  to  repay  the 
company  the  cost  of  such  mains,  without  interest,  in  case  the 
city  should  authorize  any  other  person  or  company  “  to  use 
any  of  the  thoroughfares  of  the  city,  where  the  said  Gas 
Light  Company  shall  have  laid  gas  pipes  for  the  purpose  of 
supplying  the  city  with  gas.”  The  Gas  Light  Company, 
however,  was  to  make  an  allowance  to  the  city  of  $18  for 
each  attachment  for  private  consumers  which  might  have  been 
made  up  to  the  time  when  the  city  repaid  the  company  for 
the  extensions.  It  was  also  stipulated  that  the  company 
should  furnish  the  city  annually  a  statement  of  the  number 
of  feet  of  mains  laid  under  this  contract,  and  a  plan  showing 
their  location.  The  city  reserved  the  right  to  repeal  this 
ordinance. 

A  second  gas  company  was  incorporated  by  special  act  of 
the  Maryland  legislature  in  1860  and  was  given  the  same 
rights  which  the  original  Gas  Light  Company  of  Baltimore 
had  obtained  under  the  ordinance  and  legislative  act  of  1816. 2 
In  1867  a  third  company  was  incorporated  and  received  simi¬ 
lar  powers.8  In  this  act  there  was  a  specific  provision  to  the 
effect  that  the  company  should  not  in  any  manner  injure  or 
displace  any  of  the  water  pipes  of  the  city  or  any  of  the  pipes 
of  the  Gas  Light  Company.  The  company  was  also  re¬ 
quired  to  restore  the  surface  of  any  streets  disturbed  by  it 
for  the  laying  of  its  pipes. 

In  1868  an  ordinance  was  passed  requiring  the  pioneer 
company  to  record  in  the  office  of  the  city  commissioner  the 
name  and  portion  of  each  street  in  which  it  had  laid  any  main 
or  service  pipe,  and  in  the  case  of  a  service  pipe  or  other 
pipe  not  considered  a  main,  the  company  was  to  give  the 
number  of  the  house  to  which  the  pipe  was  to  be  attached 
and  the  date  of  laying  the  main  and  the  service  pipe  or  at¬ 
tachment.4  Special  provision  was  also  made  for  the  repav¬ 
ing  of  streets  opened  by  this  company. 

In  1876  still  another  company  received  a  charter  from  the 
legislature  granting  it  all  the  powers  and  privileges  conferred 
by  the  original  ordinance  and  act  of  1816.5  This  company 

1  Public  Service  Corporations  of  Baltimore,  op.  cit*,  p.  628. 


NATURAL  GAS  FRANCHISES. 


625 


also  received  a  franchise  direct  from  the  city  council  on  June 
12,  1876. 1  Under  this  grant  the  Consumers  Mutual  Gas 
Light  Company  of  Baltimore  City  was  authorized  to  lay  pipes 
in  the  streets  of  the  city  and  was  required  after  laying,  re¬ 
pairing  or  removing  them  to  fill  and  repair  the  excavations 
which  it  had  made  in  any  street  for  that  purpose.  The  com¬ 
pany  was  not  to  displace  other  pipes  laid  by  the  city  or  by 
other  gas  companies.  The  city  reserved  the  right  to  purchase 
the  plant  after  two  years,  and  before  the  expiration  of  five 
years,  upon  the  payment  of  its  cost  plus  ten  per  cent.  All 
of  these  companies  and  one  other,  which  appears  to  have  re¬ 
ceived  no  special  franchise  for  general  lighting,  were  finally 
brought  together  into  the  Consolidated  Gas  Company  of 
Baltimore  City,  incorporated  in  1888. 2  This  company  in 
turn  was  joined  with  the  United  Electric  Light  and  Power 
Company  and  as  a  final  result,  the  Consolidated  Gas,  Elec¬ 
tric  Light  and  Power  Company  of  Baltimore  City  was 
organized  in  1906,  and  received  a  special  charter  from  the 
legislature  authorizing  it  to  manufacture  and  sell  gas  for  all 
purposes  in  the  territory  through  which  it  had  the  right  to 
operate  by  reason  of  the  powers  it  had  inherited  from  its 
constituent  companies.3  All  of  the  gas  franchises  held  by 
this  company  are  unlimited  as  to  time. 

In  1909  there  has  been  considerable  agitation  in  Baltimore 
and  Maryland  for  the  establishment  of  a  Public  Utilities  Com¬ 
mission  to  regulate  the  rates  and  service  of  the  corporations 
supplying  public  utilities  in  Baltimore.  In  May,  1909,  the 
Consolidated  Gas,  Electric  Light  and  Power  Company 
brought  forward  a  proposition  to  bring  natural  gas  to  the  city 
through  pipe  lines  230  miles  long  from  the  West  Virginia 
fields.  The  company  proposed  to  charge  58  cents  per  1000 
cubic  feet  for  domestic  lighting  service;  45  cents  for  cook¬ 
ing,  and  40  cents  for  fuel  and  power,  in  place  of  the  flat 
rate  of  $1.10,  with  10  cents  discount  for  cash,  which  is  being 
charged  for  artifical  gas.  The  company  at  first  proposed 
that  the  mayor  and  the  governor  acting  together  should  name 
five  of  the  eighteen  members  of  the  company’s  board  of 
directors,  and  that  40  per  cent  of  the  company’s  net  profits, 
after  paying  all  fixed  charges  and  four  per  cent  on  its  com- 

*  Public  Service  Corporations  of  Baltimore ,  op.  cit p.  630. 


626 


MUNICIPAL  FRANCHISES. 


mon  stock,  should  be  turned  into  the  public  treasury.1  For 
carrying  out  this  plan  it  was  unnecessary  for  the  company 
itself  to  secure  new  franchises  from  the  city  or  the  state. 
What  was  required  was  the  friendly  cooperation  of  the  public 
officials,  and  the  acceptance  by  the  city  and  the  state  of  the 
partnership  scheme  in  lieu  of  the  establishment  of  a  Public 
Utilities  Commission  with  power  to  regulate  the  rates  and 
service  of  the  company.  The  cooperation  of  the  Governor,  the 
Attorney-General,  the  Mayor  and  the  City  Solicitor  appar¬ 
ently  was  promised  before  or  immediately  after  the  public 
announcement  of  the  company’s  proposition.  These  officials 
in  giving  their  support  to  the  scheme  argued  that  the  pres¬ 
ence  of  five  men  representing  the  public  interest  on  the  com¬ 
pany’s  board  of  directors  would  insure  complete  publicity  of 
the  company’s  policies  and  profits,  and  would  in  this  way 
expose  abuses  and  enable  them  to  be  corrected  either  by 
force  of  public  sentiment  or  by  future  regulations  by  the 
city  or  state. 

It  can  readily  be  seen  that  the  partnership  scheme  is  radi¬ 
cally  different  from  the  plan  of  control  by  a  state  or  city 
commission  having  authority  to  regulate  rates  and  service. 
By  the  promised  division  of  net  profits  the  city’s  represent¬ 
atives  on  the  board  of  directors  might  naturally  be  brought 
to  the  same  point  of  view  taken  by  the  company’s  own  men, 
for  the  reason  that  the  city  would  get  no  share  of  the  profit 
unless  the  company  made  good  profits  to  begin  with.  It  was 
alleged  by  the  Baltimore  News  that  the  company’s  common 
stock  represented  water.  An  examination  of  the  company’s 
charter  shows  that  its  authorized  capital  stock  is  a  little 
less  than  $22,000,000,  of  which  approximately  $9,500,000 
is  common  stock  and  the  remainder  either  preferred  stock 
or  prior-lien  preferred  stock.2  All  of  the  preferred  stock  of 
both  classes  is  entitled  to  6%  cumulative  dividends  out  of  the 
profits  before  any  dividends  are  to  be  paid  on  the  common 
stock.  Apparently,  therefore,  the  city  would  not  under  this 
proposition  have  been  in  a  position  to  receive  any  profits  at 
all  until  the  company  had  earned  very  handsome  returns  upon 
its  capital  investment.  This  sort  of  a  combination  fails  to 
distinguish  the  essential  difference  between  a  public  and  a 

1  See  verbatim  report  of  the  hearing  before  the  governor  and  cabinet,  published, 
in  the  Baltimore  News ,  of  June  29  and  June  30. 

3  Piiblic  Service  Corporations ,  op.  cit p.  603. 


NATURAL  GAS  FRANCHISES. 


627 


private  interest  in  relation  to  municipal  franchises.  A  pri¬ 
vate  company  operating  a  franchise  must  necessarily  be 
guided  by  private  motives  and,  so  far  as  it  is  permitted  to  do 
so,  will  shape  its  policy  so  as  to  receive  from  the  enjoyment 
of  its  monopoly  in  the  streets  the  largest  possible  revenue. 
On  the  other  hand,  public  interest  demands  that  municipal 
monopolies  shall  be  conducted  primarily  in  the  interest  of 
the  consumer,  and  that  accordingly  service  and  rates  be  so 
adjusted  as  to  leave  only  a  sufficient  profit  upon  the  capital 
actually  invested  to  induce  people  to  put  their  money  into  the 
enterprise.  In  view  of  this  radical  difference  in  motives, 
the  partnership  scheme  will  always  inevitably  reduce  itself 
to  one  of  two  situations.  Either  the  minority  directors  repre¬ 
senting  the  city  will  be  lured,  through  the  promised  division 
of  profits,  to  go  over  to  the  private  point  of  view  so  that  the 
consumers  will  not  be  represented  at  all,  or  the  majority 
directors  representing  the  private  point  of  view  will  outvote 
and  overrule  the  minority.  While  the  minority  directors 
would  undoubtedly  be  in  a  position,  if  they  were  men  of 
leisure,  experience  and  persistence,  to  compel  publicity  of  the 
company’s  affairs,  they  w’ould  have  absolutely  no  direct  power 
of  control  and  would  be  compelled  either  to  establish  a  gentle¬ 
men’s  agreement  with  their  fellow-directors,  or  else  maintain 
a  constantly  disagreeable  attitude  toward  them. 

Having  encountered  considerable  opposition  to  its  original 
plan  the  company  came  forward  in  August,  1909,  with  a 
specific  ordinance  which  it  desired  to  have  passed  by  the 
Baltimore  council.  In  this  ordinance  the  partnership  di¬ 
rectorate  and  profit  sharing  scheme  is  abandoned,  and  instead 
of  it  the  company  proposes  to  rebate  to  its  domestic  consumers 
of  gas  and  electricity  one-half  of  the  net  profits  of  its  busi¬ 
ness  in  any  year  after  the  payment  of  4%  dividends  on  its 
present  common  stock  of  the  par  value  of  $6,300,034.  The 
city  is  to  contract  with  the  company  not  to  reduce  during  a 
period  of  twenty  years  the  rates  for  natural  gas  named  in  the 
ordinance  or  the  rates  for  electritity  as  fixed  in  the  company’s 
present  schedules.  In  case  the  supply  of  natural  gas  should 
prove  insufficient  or  fail  altogether,  the  company  would  be 
permitted  to  furnish  artificial  gas  at  90  cents  per  1000  feet 
from  the  fourth  to  the  sixth  year  after  the  commencement  of 
the  distribution  of  natural  gas,  and  thereafter,  “  at  a  price 


628 


MUNICIPAL  FRANCHISES. 


not  exceeding  the  average  of  the  rates  (adjusted  for  similar 
manufacturing  conditions)  charged  for  artificial  gas  in  the 
ten  cities  of  the  United  States  which  had  a  consumption  of 
artificial  gas  during  the  previous  calendar  year,  most  nearly 
equal  to  the  annual  consumption  of  artificial  gas  in  the  city 
of  Baltimore.”  In  case  the  company  should  mix  natural  and 
artificial  gas,  it  would  mix  its  rates  accordingly.  Electricity 
rates  also  might  be  revised  by  the  company  at  any  time,  either 
downward  or  upward,  so  as  to  equal  “  the  average  of  the 
scheduled  rates  for  the  same  classes  and  conditions  of  serv¬ 
ice,  in  the  (10)  cities  of  largest  population  of  the  United 
States,  exclusive  of  Baltimore,  adjusted  to  similar  manu¬ 
facturing  conditions.”  Questions  of  difference  ”  under  this 
contract  between  the  city  and  the  company  would  be  referred 
to  a  board  of  arbitration  consisting  of  an  engineer  appointed 
by  each  of  the  parties  and  a  third  engineer  selected  by  the 
first  two. 

If  this  ordinance  is  passed  the  state  legislature  will  be 
asked  to  ratify  it  by  special  act.  If  that  is  done,  rates  for 
gas  and  electricity  in  Baltimore  will  be  fixed  by  contract  for 
a  period  of  twenty  years,  beyond  the  power  of  any  readjust¬ 
ment  by  a  public  utility  commission.  The  scheme  for  re¬ 
adjusting  rates  according  to  charges  in  other  cities  is  about 
the  most  delusive  and  impossible  proposition  that  could  be 
devised.  The  company  does  not  propose  to  build  the  pipe 
line  and  bring  the  gas  to  Baltimore.  That  is  to  be  done  by 
an  independent  corporation  which  will  have  to  get  a  franchise 
from  the  state  for  the  purpose.  The  Baltimore  company  will 
control  only  the  distribution  system,  so  far  as  natural  gas  i3 
concerned.  Yet  it  frankly  asks  the  city  to  fix  an  irrevocable 
schedule  of  rates  which  will  yield  a  sufficient  profit  to  retire 
within  twenty  years  the  entire  investment  of  approximately 
$15,000,000  required  for  the  construction  of  the  pipe  line  and 
the  necessary  changes  in  the  distributing  system.  It  is 
obvious  that  the  rates  which  the  local  company  is  to  pay  the 
pipe  line  company  for  gas  delivered  at  the  Baltimore  city 
line  may  be  fixed  by  contract  between  the  companies  so  as  to 
prevent  the  earning  of  any  bigger  profits  by  the  local  com¬ 
pany  than  the  latter  may  desire.  The  men  back  of  the  natural 
gas  proposition  say  they  have  a  reasonable  confidence  that 
the  natural  gas  supply  will  last  twenty  years.  Under  the 


NATURAL  GAS  FRANCHISES. 


629 


proposed  ordinance,  all  they  got  after  the  end  of  the  twenty 
years  over  and  above  operating  expenses  would  be  clear 
profit. 

269.  Extensions  of  service -Artificial  gas  franchises  in 
Indianapolis.  — The  experience  of  Indianapolis  with  gas 
franchises  is  considerably  more  extensive  and  enlightening 
than  that  of  most  cities.  Originally  the  city  was  supplied 
with  artificial  gas.  Thereafter,  during  the  years  when  the 
Indiana  gas  fields  were  in  their  prime,  natural  gas  was  intro¬ 
duced  and  its  use  became  practically  universal.  Still  later 
the  supply  of  natural  gas  gave  out  and  manufactured  gas 
was  again  used  exclusively. 

A  franchise  contract  for  the  supply  of  artificial  gas  seems 
to  have  been  granted  as  early  as  1866. 1  Ten  years  later  the 
city  gave  a  competing  franchise  to  certain  individuals  who 
were  required  to  incorporate  a  company  for  the  purpose  of 
supplying  the  entire  city  and  its  inhabitants  with  gas  “to  the 
extent  and  as  fully  and  completely  as  is  now  or  may  hereafter 
be  done  by  the  Indianapolis  Gas  Light  and  Coke  Company.”  2 
It  was  stipulated  that  two-thirds  of  the  directors  of  the  new 
company  should  be  residents  of  the  city  and  that  the  com¬ 
pany  should  give  a  bond  in  the  sum  of  $25,000  that  it  would 
furnish  gas  for  a  period  of  at  least  ten  years  “  distinctly 
and  apart  from  any  other  gas  company,”  and  that  it  would 
not  sell  out  to,  or  consolidate  with  the  existing  company. 
Failure  to  comply  with  the  provisions  of  the  franchise  would 
result  in  the  forfeiture  of  this  bond  and  would  enable  the 
city  council,  in  its  discretion,  to  forfeit  the  franchise  itself. 
The  company  was  to  commence  work  within  sixty  days,  and 
to  have  at  least  ten  miles  of  pipe  laid  by  October  1,  1877. 
It  was  provided  that  the  company  should  make  extensions 
for  the  purpose  of  supplying  would-be  consumers  in  any  case 
where  such  persons  would  guarantee  “  as  many  as  fifteen 
burners  upon  any  square  or  in  any  building  or  buildings,  or 
any  square  adjacent  to  miains  already  laid,”  but  not  more 
than  three  miles  of  mains  could  be  required  in  any  one  year 
under  this  provision.  Moreover,  the  company  was  required 
to  extend  its  mains  alon?  any  street  contiguous  to  where  its 
mains  had  already  been  laid  within  ninety  days  after  having 
been  ordered  to  do  so  by  resolution  of  the  common  council. 

1  Laws  and  Ordinances ,  City  of  Indianapolis,  1904,  op.  cit .,  p.  472.  *  Ibid.,  p.  469. 


630 


MUNICIPAL  FRANCHISES. 


The  company  was  also  required  upon  application  in  writing 
to  lay  all  necessary  service  pipes  in  or  across  any  street,  alley, 
gutter  or  sidewalk.  It  was  further  stipulated,  either  by  the 
original  ordinance  or  by  an  amendment  adopted  in  the  fol¬ 
lowing  year,  that  nothing  in  this  franchise  should  be  con¬ 
strued  as  binding  the  city  to  use  any  of  the  gas  made  by  this 
company  in  the  street  lamps,  public  buildings  or  offices.  The 
maximum  price  of  gas  both  to  the  city  and  to  private  con¬ 
sumers  was  fixed  at  $2  per  1000  cubic  feet,  exclusive  of  the 
Government  tax.  The  city  was  not  to  be  liable  in  any  way 
for  royalty  or  other  charges  by  reason  of  any  patent  upon 
gas  manufactured  and  furnished  by  the  company.  The  city 
warrants  were  to  be  accepted  by  the  compan}^  at  par  in  pay¬ 
ment  for  gas  used  for  municipal  purposes.  The  gas  fur¬ 
nished  was  to  be  “  free  from  all  non-inflammable,  poisonous 
qualities,  and  in  all  other  respects  of  the  highest  standard 
purity,  and  not  less  than  sixteen  candle  illuminating  power.” 
Gas  was  to  be  supplied  promptly  and  in  sufficient  quantities 
to  all  paying  consumers  and  to  all  persons  applying  for  it 
on  streets  where  the  company’s  mains  had  been  extended. 

Meters  were  to  be  furnished  and  maintained  by  the  com¬ 
pany  free,  and  no  charge  was  to  be  made  for  furnishing  or 
laying  service  pipes  or  for  tapping  the  main.  For  making 
connections  between  its  service  pipes  and  the  pipes  of  any 
person  applying  for  gas  at  the  street  line,  and  for  setting 
meters,  the  company  was  to  charge  only  the  actual  cost  of 
the  work.  It  was  provided  that  all  gas  sold  by  the  company 
should  be  accurately  measured  at  the  company’s  expense 
and  that  the  company  should  furnish  all  facilities  in  its  pos¬ 
session  to  any  agent  appointed  by  the  common  council  “  to 
test  the  accuracy  of  meters  or  the  purity  of  gas  and  illu¬ 
minating  properties  ”.  Failure  to  observe  the  conditions  of 
the  ordinance  was  to  be  sufficient  cause  for  its  repeal  by  the 
common  council,  but  such  failure  was  to  be  determined  by 
judicial  decision.  The  company  was  required  to  give  three 
days’  notice  to  the  city  civil  engineer  before  opening  any 
street  for  the  purpose  of  laying  its  pipes,  and  was  also  re¬ 
quired  to  repair  the  streets  which  had  been  broken  up  by  it 
within  a  reasonable  time  and  in  a  manner  acceptable  to  that 
officer.  It  was  stipulated  that  the  gas  pipes  should  not  in¬ 
terfere  with  the  drainage  or  water  supply  of  the  city,  and  in 


/ 


NATURAL  GAS  FRANCHISES.  631 

case  of  necessity  the  company  should  move  its  pipes  at  its 
own  expense. 

In  1885,  a  ten-year  lighting  contract  was  entered  into  by 
the  city  of  Indianapolis  with  the  Indianapolis  Gas  Light 
and  Coke  Company  whose  original  franchise  had  been  granted 
about  twenty  years  earlier.1  It  was  recited  that  in  considera¬ 
tion  of  the  changes  to  be  made  in  the  original  contract  by 
the  acceptance  of  this  ordinance,  “  it  is  agreed  by  said  city, 
that  if  she  continues  to  light  her  public  streets  and  grounds 
with  gas,  it  shall  be  done  with  the  gas  of  said  company, 
during  the  term  of  ten  years  from  March  1,  1885.”  It  was 
provided,  however,  that  the  city  should  be  at  liberty  to  adopt 
some  other  mode  of  public  lighting,  and  in  that  case  would 
not  be  obliged  to  use  the  company’s  gas.  The  maximum 
price  of  gas  both  to  the  city  and  to  private  consumers  was 
fixed  in  this  contract  at  $1.80.  Most  of  the  provisions  of 
this  contract  were  similar  to  those  contained  in  the  fran¬ 
chise  of  1876  which  has  already  been  described.  There  was 
a  new  provision,  however,  to  the  effect  that  “  if  any  discovery 
or  improvement  shall  be  made  in  the  preparation  of  gas  from 
coal  or  other  material,  either  solid  or  liquid,  by  which  the 
cost  of  obtaining  the  same  shall  be  materially  diminished, 
and  the  same  shall  be  adopted  in  other  principal  cities  of  the 
country,  then,  and  in  such  case,  the  company  aforesaid  shall 
introduce  and  use  such  discovery  or  improvement  in  said 
city  of  Indianapolis,  and  shall  make  such  reduction  in  the 
price  of  gas  sold  as  shall  be  proportionate  to  the  saving  by 
such  discovery  or  improvement.”  The  arrangement  in  regard 
to  extensions  was  also  new.  It  provided  that  whenever  prop¬ 
erty  owners  “  embracing  a  space  of  510  feet,  contiguous  to  the 
mains  of  said  company  ”  should  signify  by  petition  to  the 
city  authorities  their  desire  to  use  gas,  if  this  petition  were 
approved  by  the  council  and  board  of  aldermen,  the  company 
was  to  proceed  to  lay  down  the  necessary  mains  and  service 
pipes  to  meet  the  demand,  on  condition  that  the  citizens  along 
the  street  should  obligate  themselves  to  take  fifteen  or  more 
burners  for  each  space  of  510  feet.  The  extensions  were  to 
be  made  within  sixty  days  of  the  approval  of  the  petition  at 
any  period  between  March  1  and  November  1.  Public 


1  Laws  and  Ordinances ,  op.  cit .,  p.  472. 


632 


MUNICIPAL  FRANCHISES. 


grounds  of  the  city,  county  or  state  were  excepted  from  this 
rule  in  regard  to  extensions. 

On  July  5,  1899,  the  contract  under  which  artificial  gas 
has  since  been  furnished  to  the  city  of  Indianapolis  was 
ratified.1  This  contract  was  made  for  the  purpose  of  set¬ 
tling  certain  litigation  which  had  arisen  over  the  ordinance 
passed  by  the  city  two  years  earlier  to  regulate  the  con¬ 
sumption  and  distribution  of  gas  and  fix  the  rates  to  be 
charged  for  it.  Under  the  terms  of  this  contract  the  city 
was  to  repeal  the  ordinance  referred  to,  and  the  company 
was  to  be  entitled  to  receive  during  the  next  ten  years  the 
following  rates: 

Until  the  total  amount  of  artificial  gas  sold  by  the  company  within  the 
city  limits  should  reach  300,000,000  cubic  feet  per  annum,  $1  per  1,000. 

Thereafter,  until  the  amount  sold  reached  350,000,000  cubic  feet  per 
annum,  95  cents. 

Thereafter,  during  the  remainder  of  the  ten-year  period,  90  cents. 

It  was  provided  that  the  reduction  in  price  should  take 
effect  as  to  all  gas  supplied  for  illuminating  purposes  after 
the  last  day  of  any  semi-annual  period  in  which  it  was  found 
that  consumption  of  artificial  gas  had  so  increased  as  to  en¬ 
title  the  city  to  such  reduction.  The  company  was  required 
to  file  semi-annually  a  sworn  report  containing  a  full  and 
true  statement  of  the  number  of  cubic  feet  of  artificial  gas 
manufactured  and  sold  by  it  and  the  number  of  meters  in 
use  by  consumers  in  the  city  during  the  six  months  pre¬ 
ceding  any  such  report.  It  was  provided  that  “  in  case  the 
board  of  public  works  should  at  any  time  be  convinced,  either 
from  information  received  by  its  members,  or  otherwise,  that 
any  such  report  so  filed  is  erroneous  in  any  particular,  said 
board  shall  have  the  right,  through  its  members  or  through 
any  person  it  may  designate,  to  examine  all  the  books  of  said 
-company  showing  anything  concerning  the  amount  of  arti¬ 
ficial  gas  manufactured  and  sold  as  aforesaid  ”.  In  case  of 
disagreement  between  the  company  and  the  city  as  a  result 
of  any  such  examination,  the  question  at  issue  was  to  be  sub¬ 
mitted  “  to  the  arbitrament  of  two  competent  and  disin¬ 
terested  persons  non-residents  of  said  city  ”,  one  to  be  ap¬ 
pointed  by  each  party.  If  these  two  should  fail  to  agree 
they  were  to  choose  a  third  arbitrator,  and  in  case  they  could 
not  agree  upon  the  choice,  then  the  third  arbitrator  was  to 

1  Laws  and  Ordinances ,  op.  cit.,  p.  476. 


NATURAL  GAS  FRANCHISES. 


633 


be  appointed  by  the  person  who  at  the  time  was  the  judge 
of  the  circuit  court  of  Marion  County.  The  decision  of  the 
majority  of  the  arbitrators  was  to  be  final  and  conclusive 
and  the  price  to  be  charged  for  gas  was  to  be  fixed,  accord¬ 
ingly.  The  gas  furnished  was  to  be  “merchantable  illu¬ 
minating  gas  free  from  non-inflammable  or  poisonous 
qualities,  in  all  respects  of  the  highest  standard  of  purity, 
and  of  not  less  than  eighteen  candle-light  power  ”.  This 
standard  was  expressly  defined  as  requiring  that  a  lava- 
tipped,  Bunson-Argand  burner  consuming  five  feet  of  gas 
per  hour  at  a  pressure  of  not  more  than  two-tenths  of  an 
inch  should  give  a  light  as  measured  by  photometric  ap-, 
paratus  in  ordinary  use  of  not  less  than  eighteen  sperm 
candles,  each  consuming  120  grains  of  sperm  per  hour.  It 
was  also  provided  that  the  gas  should  not  contain  more  than 
twenty  grains  of  sulphur  and  two  and  one-half  grains  of  am¬ 
monia  per  100  cubic  feet.  It  was  provided  that  the  gas 
should  be  delivered  at  the  consumer’s  burner  at  such  pressure 
in  the  mains  as  should  be  “  consistent  with  the  proper  dis¬ 
tribution  of  the  gas  throughout  the  entire  system  of  mains  in 
the  city,”  and  the  degree  of  pressure  was  to  be  at  all  times 
subject  to  the  control  of  the  board  of  public  works.  All  the 
company’s  appliances  and  apparatus  were  to  be  subject  to 
inspection  at  any  time  by  the  proper  officer  designated  by 
the  board. 

Elaborate  provisions  were  made  for  the  extension  of  serv¬ 
ice.  Whenever  a  petition  should  be  presented  to  the  board 
of  public  works  signed  by  the  owners  or  occupants  of  prop¬ 
erty  within  the  territory  of  the  city  asking  for  an  extension 
and  the  petitioners  bound  themselves  to  take  fifteen  or  more 
burners  and  use  them  for  gas  for  each  500  feet  of  pipe  ex¬ 
tension  asked  for,  not  including  any  public  grounds  of  the 
city,  county,  state  or  Federal  Government,  the  board  should 
give  the  compan}^  written  notice  requiring  it  to  appear  by  its 
representatives  at  a  fixed  time  not  less  than  five  days  after 
service  of  the  notice  to  show  cause  why  the  petition  should 
not  be  granted.  It  was  expressly  provided  that  the  minimum 
consumption  required  should  not  be  for  each  individual 
stretch  of  500  feet,  but  should  be  an  average  for  each  500 
feet  of  the  entire  extension.  The  notice  to  the  company  was 
to  contain  an  accurate  description  of  the  streets  and  alleys 


634 


MUNICIPAL  FRANCHISES. 


along  which  the  extension  was  asked  and  the  territory  whose 
inhabitants  it  was  proposed  to  have  supplied  with  gas.  The 
board  was  to  give  the  company  a  full  hearing  upon  the  ques¬ 
tion  as  to  whether  the  petition  had  been  signed  by  the  requi¬ 
site  number  of  persons  and  as  to  whether  the  extension  could 
reasonably  be  required.  If  the  company  did  not  appear,  the 
board  could  act  upon  such  evidence  and  information  as  it 
might  receive  from  any  source.  If  after  the  hearing  it  ap¬ 
peared  that  the  petition  complied  with  the  conditions  already 
stated  and  that  the  extension  was  reasonable,  an  order  was 
to  be  made  fixing  the  time  within  which  the  company  must 
make  the  extension  desired.  It  was  provided,  however,  that 
this  period  should  in  all  cases  be  of  sufficient  length  to  allow 
the  company  “  by  the  exercise  of  reasonable  diligence  ”  to 
make  the  extensions  within  the  time  allowed.  If  the  company 
refused  to  make  the  extension  as  required,  it  was  to  forfeit 
as  liquidated  damages  the  sum  of  $50  for  each  day  of  delay 
beyond  the  time  fixed.  The  company  was  not  to  be  com¬ 
pelled,  however,  to  lay  any  pipes  or  mains  during  the  winter 
months,  that  is  to  say,  between  November  1  and  April  1. 

It  was  stipulated  that  the  company  should  not  use  any 
meter  whose  measurement  was  more  than  two  per  cent  fast 
or  three  per  cent  slow.  The  board  of  public  works  reserved 
the  right  to  inspect  and  test  the  company’s  meters  at  any 
time.  In  case  of  complaint  in  regard  to  the  quality  of  the  gas, 
or  the  accuracy  of  the  meters,  the  board  “  being  satisfied  that 
such  complaint  is  well  founded,  shall  have  the  right  to  em¬ 
ploy  experts  to  investigate  the  quality  of  such  gas  and  to  in¬ 
spect  and  test  any  such  meters  ”,  and  the  company  agreed  to 
pay  the  reasonable  value  of  the  service  of  any  such  experts. 

It  was  expressly  agreed  that  if  the  company  failed  to  live 
up  to  its  contract,  its  rights  under  the  contract  should  cease. 
It  was  also  agreed  that  nothing  in  the  contract  should  require 
the  city  to  continue  to  use  gas  for  public  lighting  during  the 
whole  or  any  part  of  the  ten-year  period.  It  was  stipulated, 
however,  that  as  long  as  the  city  used  gas  for  street  lamps, 
the  cost  to  the  city  per  post  should  not  be  greater  than  was 
being  charged  at  the  time  of  this  contract.  The  company 
was  bound  by  the  usual  provisions  relating  to  the  restoration 
of  streets  disturbed  by  it,  and  the  indemnification  of  the  city 
against  damage  suits  resulting  from  the  company’s  activities. 


NATURAL  GAS  FRANCHISES. 


635 


270.  General  franchises  for  the  supply  of  natural  gas, 
subject  to  acceptance  by  any  person  or  corporation— In¬ 
dianapolis. — On  June  27,  1887,  the  city  of  Indianapolis 
passed  an  ordinance  authorizing  any  company  organized 
under  the  laws  of  Indiana,  or  any  firm,  company  or  indi¬ 
vidual  whose  principal  offices  were  situated  in  Indianapolis, 
to  “  lay,  extend  and  maintain  mains,  branches,  pipes  and 
conduits  through  the  streets,  avenues,  lanes,  alleys  and  public 
grounds  of  said  city  99  for  the  purpose  of  supplying  the  city 
and  its  inhabitants  with  natural  gas.1  This  grant,  however, 
was  subject  to  certain  conditions.  Any  person  or  company 
desiring  to  act  under  it  was  required  as  a  preliminary  step 
to  execute  a  bond  in  the  penal  sum  of  $50,000  to  guarantee 
that  other  gas  and  water  pipes  and  public  and  private  sewers 
would  not  be  interfered  with;  that  the  streets  would  be 
properly  restored  after  excavation  and  be  kept  in  repair  for 
one  }7ear,  or  in  case  they  were  being  maintained  under  the 
contractor’s  bond,  then  for  the  full  period  covered  by  such 
bond ;  that  all  dirt  and  rubbish  resulting  from  such  excava¬ 
tions  in  the  streets  would  be  cleaned  up  without  delay;  that 
the  city  would  be  reimbursed  for  all  expense  incurred  by  it 
in  restoring  pavements  or  clearing  away  rubbish  resulting 
from  the  operations  of  the  grantee;  that  the  city  should  be 
indemnified  aganst  damages  resulting  from,  work  under  the 
franchise,  and  finally  that  work  should  be  commenced  under 
the  ordinance  within  sixty  days  after  its  acceptance  and  25 
miles  of  mains  should  be  laid  within  the  corporate  limits  of 
the  city  within  one  year.  The  mayor  w’as  authorized  to 
require  a  renewal  of  this  bond  whenever  in  his  judgment  it 
had  become  insufficient  by  reason  of  the  death  or  insolvency 
of  any  of  the  sureties. 

It  was  also  provided  that  the  gas  pipes  should  be  laid 
wherever  practicable  in  the  alleys,  and  that  nothing  should 
be  done  under  this  ordinance  until  the  grantee  had  filed  with 
the  city  civil  engineer  a  general  plan  showing  all  the  streets 
to  be  opened,  the  proposed  location  of  mains  and  the  highest 
pressure  intended  to  be  carried  on  the  line  “  with  precau¬ 
tions  for  safety  ”.  This  plan  was  to  be  subject  to  the  approval 
of  the  common  council  and  board  of  aldermen,  and  if  ap- 


1  Laws  and  Ordinances,  op.  cit.,  p.  591. 


636 


MUNICIPAL  FRANCHISES. 


proved  was  to  remain  in  the  engineer’s  office  a3  a  public 
record.  The  grantee  was  required  to  change  the  location  of 
its  mains  whenever  necessary  for  the  accommodation  of  the 
public  sewers.  It  was  provided  that  street  work  should  be 
completed  with  all  reasonable  dispatch.  All  pipes,  mains 
and  apparatus  were  to  be  of  the  most  approved  design  and 
quality,  and  the  pipes  were  to  be  of  standard  weight  and  be 
so  laid  as  to  prevent  the  escape  of  gas,  and  so  as  to  make  the 
use  of  gas  safe.  Service  pipes  were  to  be  laid  to  the  property 
line  of  the  consumer.  In  case  the  city  civil  engineer  dis¬ 
covered  at  any  time  that  the  grantee  was  doing  its  work  “  in 
a  careless,  dilatory,  incompetent  or  unskilful  manner  ”,  he 
was  to  notify  the  grantee,  and  unless  the  matter  was  im¬ 
mediately  remedied,  report  it  to  the  common  council  and 
board  of  aldermen  to  whom  powder  was  reserved  to  pass  any 
ordinance  or  resolution  necessary  to  remedy  the  defect. 

In  order  to  provide  against  the  escape  of  gas  from  pipes 
passing  into  cellars,  sewers  and  buildings,  the  grantee  was 
required,  whenever  deemed  necessary  by  the  city  engineer 
and  the  common  council  and  board  of  aldermen,  to  provide 
a  system  of  escape  pipes  “  sufficient  to  carry  off  any  and  all 
gas  which  may  leak  or  escape  through  defective  joints, 
service  pipe  connections,  or  defects  in  the  mains  ”.  It  was 
stipulated  that  gauges  showing  the  amount  of  pressure  on 
all  natural  gas  lines  should  be  erected  by  the  grantees  at 
their  own  expense  and  should  be  located  at  points  designated 
by  the  city  authorities,  and  should  be  open  at  all  times  to 
public  inspection. 

An  elaborate  schedule  of  flat  rates  for  cooking  and  heat¬ 
ing  was  enacted.  The  monthly  charge  for  each  cooking 
stove  ranged  from  50  cents  to  $1.25  in  the  summer  and  from 
75  cents  to  $1.50  in  the  winter,  according  to  the  kind  of 
stove.  The  annual  charge  ranged  from  $6  to  $15.  The  rates 
for  heating  residences,  offices,  stores,  halls  and  other  build¬ 
ings  were  arranged  according  to  the  diameters  of  the  firepots 
used.  The  charge  for  either  a  base  burner  or  an  upright 
stove  with  a  firepot  no  more  than  18  inches  in  diameter  was 
to  be  75  cents  per  month  in  the  winter  and  50  cents  per 
month  in  the  summer.  For  a  residence  furnace  having  a 
firepot  not  more  than  22  inches  in  diameter  the  monthly 
charge  was  to  be  $3  and  the  annual  charge  $20.  The  rates 


NATURAL  GAS  FRANCHISES. 


637 


increased  up  to  $8  a  month,  or  $65  a  year,  for  a  furnace  with 
a  firepot  more  than  40  inches  in  diameter.  The  rate  for 
each  grate  or  open  front  heating  stove  was  $10  per  annum. 
Special  rates  were  fixed  for  cooking  stoves  in  restaurants 
and  hotels. 

It  was  provided  that  if  the  grantee  should  in  any  case 
reduce  the  price  of  gas  below  this  schedule,  it  should  there¬ 
after  be  prohibited  from  increasing  its  reduced  schedule  for 
a  period  of  three  years,  but  after  that,  an  increase  could  be 
made  with  the  consent  of  the  common  council  and  board 
of  aldermen.  It  was  provided  that  “  not  to  exceed  one-half 
of  the  schedule  rates  shall  be  charged  for  grates  and  stoves 
used  for  heating  in  cases  where  boilers  or  furnaces  are  used 
for  heating.”  Any  consumer  would  have  the  option  to  have 
gas  furnished  by  meter  measurement  instead  of  at  schedule 
rates,  and  in  that  case  the  price  was  not  to  exceed  10  cents 
per  1000  cubic  feet.  Gas  might  be  cut  off  from  any  consumer 
who  remained  in  default  for  ten  days  in  the  payment  of  his  gas 
bill  for  the  preceding  month,  but  the  grantees  were  required 
to  furnish  gas  again  to  any  such  consumer  on  request,  after 
his  bills  had  been  paid. 

It  was  provided  that  for  manufacturing  purposes  and  for 
other  consumers  and  purposes  not  enumerated  in  the  sche¬ 
dule,  natural  gas  should  be  furnished  at  the  option  of  the 
consumer  according  to  one  of  three  plans.  He  might  take 
it  at  50  per  cent  of  the  cost  of  Indiana  steam  coal  at  $2  per 
ton,  or  he  might  take  it  by  special  agreement.  It  was  pro¬ 
vided,  however,  that  in  case  of  special  agreement  the  same 
rate  was  to  be  given  to  everyone,  whether  a  large  or  a  small 
consumer,  and  that  no  preference  was  to  be  shown  in  any 
way.  If  any  consumer  was  not  satisfied  with  either  of  the 
foregoing  plans,  he  could  take  gas  by  meter  measurement  at 
a  price  not  to  exceed  seven  cents  per  1000  cubic  feet.  It  was 
expressly  provided  that  consumers  might  use  natural  gas  for 
both  heating  and  illuminating  purposes.  The  city  also 
reserved  the  right  to  revise  and  refix  the  schedule  of  rates 
at  any  time  after  the  expiration  of  ten  years.  It  was  stipu¬ 
lated  that  the  rates  fixed  for  domestic  purposes  should  be 
based  upon  a  pressure  of  four  ounces  per  square  inch  at  the 
point  of  consumption.  The  city  reserved  the  right  after  five 
years  to  require  any  company  or  individual  furnishing  gas 


638 


MUNICIPAL  FRANCHISES. 


under  the  provisions  of  this  ordinance  to  pay  a  tax  of  three 
cents  per  foot  of  mains  laid  within  the  city  limits. 

The  grantee  was  required  to  furnish  gas  to  all  applicants 
for  any  purpose  along  its  mains,  and  to  extend  its  mains  in 
any  street  contiguous  to  where  its  mains  were  already  laid, 
within  sixty  days  after  being  ordered  to  do  so  by  resolution 
of  the  common  council  and  the  board  of  aldermen.  This 
latter  requirement  was  conditioned,  however,  upon  exten¬ 
sions  being  petitioned  for  by  owners  or  occupants  of  real  estate 
along  the  line,  and  it  was  provided  that  ten  per  cent  of  the 
petitioners  should  agree  to  become  consumers  of  gas,  and 
that  the  common  council  and  board  of  aldermen  should  con¬ 
sider  that  the  “  proposed  extension  is  reasonable  and  ought 
to  be  made.”  No  grantee  was  to  exercise  the  right  to  lay 
pipes  within  the  city  limits  until  it  had  a  line  of  mains  laid 
from  some  gas-producing  region  to  the  city  line  of  sufficient 
dimensions  to  comply  with  the  intent  of  the  ordinance.  Any 
person  or  company  desiring  to  take  advantage  of  this  or¬ 
dinance  was  required  to  file  a  written  acceptance  with  the 
City  Clerk,  which  in  the  case  of  a  company  was  to  be 
signed  by  the  President  and  Secretary  and  to  be  accompanied 
by  a  certified  copy  of  a  resolution  duly  passed  by  the  com¬ 
pany’s  board  of  directors  authorizing  acceptance.  It  was 
stipulated  that  nothing  in  this  ordinance  should  prevent  the 
city  from  giving  special  permission  to  manufacturing  con¬ 
cerns  having  a  natural  gas  well  either  within  or  without  the 
city  to  lay  private  pipe  lines  from  the  well  to  its  maufac- 
turing  establishment.  It  was  also  stipulated  that  the  city, 
upon  giving  six  months’  notice,  should  have  the  right  to 
purchase  the  entire  plant  of  any  company  or  individual  ac¬ 
cepting  the  provisions  of  the  ordinance  at  any  time  after  the 
expiration  of  ten  years  from  the  date  of  its  passage.  In  case 
of  purchase,  the  price  was  to  be  ascertained  by  arbitration 
and  paid  by  the  city  within  six  months  thereafter. 

It  is  recorded  that  five  different  companies  accepted  this 
ordinance.1  In  the  following  year,  1888,  the  city  passed  an¬ 
other  general  ordinance  to  regulate  the  laying  and  testing  of 
natural  gas  mains,  service  pipes  and  house  connections.2  All 
mains  intended  as  feeders  for  the  supply  of  gas  to  the  distrib¬ 
uting  system  were  defined  as  high  pressure  mains.  All 

1  Laws  and  Ordinances ,  op.  cit .,  p.  602.  *  Ibid.,  same  reference. 


NATURAL  GAS  FRANCHISES. 


639 


pipes  intended  to  carry  gas  for  the  supply  of  domestic  con¬ 
sumption  were  defined  as  low  pressure  mains.  Supply  pipes 
leading  from  the  mains  to  the  property  line  were  defined  as 
service  pipes.  Pipes  leading  from  the  property  line  into 
buildings  to  the  place  of  consumption  were  defined  as  house 
connections.  All  pipes  were  to  be  laid  so  that  their  tops 
would  be  at  a  depth  of  not  less  than  three  feet  below  the 
surface  of  the  street.  High  pressure  mains  were  to  be  sub¬ 
jected  to  a  test  of  eighty  pounds  air  pressure  per  square 
inch,  before  being  accepted,  but  the  ordinary  pressure  of  gas 
permitted  in  such  mains  was  limited  to  twenty  pounds  per 
square  inch.  Low  pressure  mains  and  service  pipes  were  to 
be  tested  with  ten  pounds  pressure,  although  a  pressure  of 
only  eight  ounces  of  gas  was  to  be  permitted.  All  tests  were 
to  be  made  under  the  direction  of  the  city  civil  engineer 
prior  to  the  turning  on  of  the  gas.  Service  pipes  for  domestic 
consumption  were  not  to  be  connected  with  high  pressure 
mains  “  except  in  specific  cases  remote  from  low  pressure 
mains.”  In  such  cases  gas  was  to  be  supplied  to  consumers 
only  after  the  pressure  had  been  reduced  by  an  automatic 
regulator  to  the  maximum  permitted  in  low  pressure  mains. 

Another  natural  gas  ordinance  was  passed  on  July  13, 
1891,  for  the  purpose  of  authorizing  the  laying  of  pipes  to 
supply  “  inhabitants  of  unsupplied  and  outlying  districts  ” 1 
Under  the  terms  of  this  ordinance  any  person  or  company 
accepting  it  was  required  to  furnish  natural  gas  for  fuel 
and  illuminating  purposes  to  any  person  “  contributing  to  the 
expense  of  laying  pipe  lines  to  convey  such  gas  to  the  city  of 
Indianapolis,  so  long  as  the  supply  lasts  in  the  territory 
reached  by  its  mains.”  The  gas  was  to  be  supplied  to  the 
persons  paying  the  expense  of  its  conveyance  in  proportion  to 
the  amount  paid.  The  payment  of  all  subscriptions  and  the 
supply  of  gas  in  accordance  with  them  were  to  be  regulated 
by  written  contracts  between  the  parties.  In  all  such  cases 
gas  was  to  be  furnished  at  cost.  All  companies  and  indi¬ 
viduals  supplying  gas  under  this  ordinance  were  required  to 
publish  in  two  daily  newspapers  of  the  city  semi-annual 
sworn  statements  of  their  affairs.  It  was  provided  that  any 
person  or  company  accepting  the  provisions  of  this  ordinance 
should  be  compelled  to  receive  any  subscription  for  stock  to 

1  Laws  and  Ordinances ,  op.  cit p.  605. 


640 


MUNICIPAL  FRANCHISES. 


such  corporation  or  subscriptions  for  money  to  such  company, 
firm  or  individual  made  by  any  person  living  along  the 
streets  occupied  by  the  pipe  lines. 

In  addition  to  these  general  ordinances,  special  franchises 
were  granted  in  1892  and  1893  to  the  Manufacturers’  Natural 
Gas  Company  and  the  United  States  Encaustic  Tile  Works 
Natural  Gas  Company  for  the  laying  of  pipes  for  private 
use.1  In  the  case  of  the  Manufacturers’  company,  the  corpo¬ 
ration  had  been  organized  by  a  number  of  manufacturing 
establishments  for  the  express  purpose  of  securing  a  supply 
of  natural  gas. 

271.  Low  rates ;  limited  profit ;  ultimate  municipal 
ownership  —  Indianapolis. — One  of  the  companies  accepting 
the  general  natural  gas  ordinance  of  1887  described  in  the 
preceding  section  was  the  Consumers’  Gas  Trust  Company. 
This  company  was  organized  for  a  period  of  fifty  years  with 
a  capital  stock  of  $500,000  divided  into  shares  with  a  par 
value  of  $25  each.2  The  business  of  the  company  was  man¬ 
aged  by  a  board  of  nine  directors  who  after  the  first  year 
were  elected  annually  by  a  board  of  five  trustees  named  in 
the  articles  of  incorporation.  The  entire  capital  stock  of  the 
corporation  was  placed  under  the  control  of  this  board  of 
trustees,  all  of  whom  were  to  be  stockholders  of  the  company. 
The  trustees  were  to  have  “  full,  complete,  exclusive  and  irre¬ 
vocable  power,”  during  the  continuance  of  the  corporation  to 
hold  the  stock  and  vote  it  as  fully  and  completely  as  if  they 
were  the  owners  of  it,  and  to  elect  the  directors  from  year 
to  year.  It  was  provided  that  the  capital  stock  should  be 
voted  as  a  unit  and  that  in  case  of  disagreement  among  the 
trustees,  the  majority  should  cast  the  vote  of  the  board.  The 
trustees  were  to  be  a  self-perpetuating  body.  In  case  of  a 
vacancy,  however,  and  the  failure  of  the  remaining  members 
of  the  board  to  fill  it,  the  circuit  court  of  Marion  County 
upon  application  of  any  stockholder,  was  to  appoint  a  trustee 
to  fill  the  vacancy.  Furthermore,  any  member  of  the  board 
of  trustees  could  be  removed  by  the  court  upon  the  showing 
that  he  was  the  employee  or  holder  of  any  of  the  capital 
stock  of  any  other  company  organized  for  the  purpose  of 
manufacturing  or  delivering  artificial  or  natural  gas  to  con- 

1  Laws  and  Ordinances ,  op.  cit.,  pp.  611,  616. 

*  See  Articles  of  Incorporation  of  the  Consumers’  Grs  Trust  Co.,  of  Indianapolis, 
published  with  the  company’s  By-Laws  in  leaflet  form. 


NATURAL  GAS  FRANCHISES. 


641 


Burners  in  Indianapolis  or  its  vicinity.  A  trustee  might 
also  be  removed  for  any  corrupt  practice  or  any  misconduct 
which  the  court  deemed  detrimental  to  the  interests  of  the 
company.  His  removal  from  the  city  would  in  itself  vacate 
the  office  of  any  trustee.  Subscribers  to  the  company’s  capi¬ 
tal  stock  were  to  receive  certificates  of  the  amount  of  stock 
owned  by  them  held  in  trust  by  the  trustees.  All  subscribers 
were  entitled  to  a  maximum  dividend  of  eight  per  cent  which 
might  be  paid  in  money  or  applied  in  payment  of  any  in¬ 
debtedness  of  the  subscriber  as  a  consumer  of  gas.  It  was 
provided  that  whenever  the  certificate  holders  should  have 
received  by  dividends  or  otherwise  from  the  company  an 
amount  equal  to  the  par  value  of  their  stock  with  interest  at 
eight  per  cent,  and  after  all  the  indebtedness  of  the  company 
had  been  paid,  then  it  should  be  the  duty  of  the  directors  to 
reduce  the  price  of  gas  so  that  it  should  be  supplied  to  con¬ 
sumers  at  cost.  Money  could  be  borrowed  by  the  directors 
for  the  purpose  of  developing  the  supply  of  gas  and  for  the 
construction  of  pipe  lines,  and  certificates  of  indebtedness  be 
issued  therefor  bearing  interest  at  not  to  exceed  eight  per 
cent  and  payable  at  the  option  of  the  company  after  one  year 
in  the  proportion  of  not  more  than  one-fifth  each  year. 

This  company  furnished  natural  gas  to  Indianapolis  for 
several  years  until  the  supply  gave  out  about  1904.  At  that 
time  all  but  about  ten  per  cent  of  the  outstanding  stock 
certificates  had  been  redeemed.1  A  year  or  two  later  a  new 
company  was  organized  under  the  name  of  the  Citizens’  Gas 
Company  of  Indianapolis  for  the  purpose  of  taking  over  the 
mains  of  the  old  Consumers’  Gas  Trust  Company,  manufac¬ 
turing  gas  and  supplying  it  at  60  cents  per  1000  cubic  feet. 
The  city  transferred  to  certain  individuals  who  afterwards 
organized  this  company  the  option  which  had  been  reserved  in 
the  natural  gas  ordinance  of  1887  to  purchase  the  property 
at  any  time  at  an  appraised  valuation.  A  new  franchise  was 
granted  to  these  individuals  on  August  30,  1905,  and  was 
transferred  by  them  on  May  24,  1906,  to  the  new  company.2 
Under  the  terms  of  this  franchise,  the  grantees  were  author¬ 
ized  to  lay  their  pipes  in  the  streets  of  the  city  for  the  purpose 
of  distributing  and  supplying  gas  for  fuel,  heating  and  light- 

1  Letter  from  J.  C.  Moore,  Esq.,  of  Indianopolis,  May  25, 1908. 

*  See  Citizens  Gas  Company  of  Indianapolis  ;  Franchise ,  Articles  of  Incorpora¬ 
tion  and  By-Laws ,  a  leaflet. 


642 


MUNICIPAL  FRANCHISES. 


ing.  The  grantees  were  required  to  organize  a  corporation 
with  a  capital  stock  of  $1,000,000  divided  into  shares  of  $25 
each.  Stock  was  not  to  be  increased  unless  provisions  were 
made  for  selling  new  stock  at  public  auction  upon  thirty 
days’  notice  of  the  time  and  place  of  sale,  to  be  published  in 
three  Indianapolis  newspapers  having  the  largest  city  circu¬ 
lation.  At  such  sale  the  stock  was  to  be  “  sold  at  the  best 
price  obtainable,”  and  any  premiums  secured  were  to  go  to 
the  surplus  capital  of  the  company  and  to  bear  no  dividends. 
The  company  was  to  publish  in  two  Indianapolis  newspapers 
semi-annual  public  statements  of  its  affairs  in  detail,  includ¬ 
ing  an  account  of  its  assets  and  liabilities,  its  disbursements 
and  receipts.  The  city  controller  was  to  have  the  right  to 
investigate  its  books  at  any  time  “  for  the  purpose  of  examin¬ 
ing  into  the  correctness  of  said  report,  or  for  other  purpose,” 
and  the  city  civil  engineer  was  to  have  the  right  to  examine 
the  company’s  plant  and  property  at  any  time.  There  was 
to  be  a  board  of  five  trustees  having  the  same  powers  and 
duties  as  the  trustees  in  the  old  Consumers’  Gas  Trust  Com¬ 
pany.  One  of  the  original  trustees,  however,  was  to  be  nomi¬ 
nated  by  the  mayor.  Vacancies  in  the  board  were  to  be  made 
and  filled  in  the  same  way  as  under  the  old  company’s  charter, 
except  that  the  successor  of  the  trustee  nominated  by  the 
mayor  was  also  to  be  nominated  by  the  mayor.  Subscribers 
to  the  capital  stock  of  the  new  company,  however,  were  to  be 
entitled  to  cumulative  dividends  of  not  to  exceed  ten  per 
cent  per  annum.  The  earnings  of  the  company  were  to  be 
used  in  the  following  ways: 

1.  For  the  payment  of  matured  debts  and  operating  expenses. 

2.  For  the  payment  semi-annually  of  the  ten  per  cent  dividends,  and 
any  unpaid  accrued  dividends. 

3.  For  such  extensions  and  betterments  as  might  be  ordered  by  the 
Board  of  Public  Works. 

Finally,  any  excess  after  meeting  these  charges  was  to  be 
devoted  to  the  redemption  in  whole  or  in  part  of  the  out¬ 
standing  stock  certificates.  Of  course,  dividends  were  to  be 
stopped  on  stock  that  had  been  redeemed.  As  soon  as  the 
stockholders  had  received  by  dividends  or  otherwise  an 
amount  equal  to  the  face  value  of  their  stock  with  interest 
at  the  rate  of  ten  per  cent  per  annum,  the  trustees  and 
directors  of  the  company  were  to  convey  the  gas  plant  and 
property  belonging  to  the  company  to  the  city  to  be  owned  and 


NATURAL,  GAS  FRANCHISES. 


643 


operated  or  leased  by  it,  and  all  the  rights  of  the  stockholders, 
officers,  directors  and  trustees  were  to  be  deemed  extin¬ 
guished.  The  affairs  of  the  company  were  to  be  managed  by 
a  board  of  directors  of  nine  members,  the  same  as  in  the  old 
company. 

The  franchise  was  granted  for  a  period  of  twenty-five 
years,  and  it  was  stipulated  that  at  the  expiration  of  that 
time  all  the  rights  of  the  company  to  occupy  the  city’s  streets 
should  terminate  and  cease.  If  it  happened  at  that  time  that 
the  company’s  stock  certificates  had  not  been  retired,  upon 
receiving  six  months’  notice  from  the  city  the  company’s 
board  of  directors  was  to  mortgage  the  property  for  a  sum 
sufficient  to  redeem  the  still  outstanding  stock  certificates, 
and  thereupon  convey  the  plant  to  the  city  subject  to  the 
obligations  of  such  mortgage.  It  was  provided,  however, 
that  this  mortgage  should  not  bear  interest  at  a  rate  exceed¬ 
ing  six  per  cent,  and  that  the  mortgage  should  be  payable  on 
or  before  ten  years  from  the  date  of  execution. 

It  was  further  provided  that  the  grantees  should  secure, 
acquire  or  construct  and  put  in  operation  a  fuel  gas  plant 
with  not  less  than  100  miles  of  mains  in  the  streets  of  the 
city  within  eighteen  months  of  the  date  of  the  sale  of  the 
Consumers’  Gas  Trust  Company’s  mains,  then  pending.  At 
any  time  after  the  date  of  such  sale,  the  grantees  might  be 
required  to  file  a  bond  in  the  sum  of  $25,000  to  guarantee 
that  they  would  fulfill  this  condition.  The  grantees  were 
also  to  execute  a  $25,000  bond  to  indemnify  the  city  against 
damages.  Before  commencing  operations  in  any  street  the 
grantees  were  to  furnish  the  board  of  public  works  with  a 
plan  showing  the  streets  to  be  opened  and  the  proposed  loca¬ 
tion  of  the  pipes,  with  general  specifications  as  to  the  size  and 
kind  of  pipes  to  be  used.  They  were  also  within  sixty  days 
after  laying  any  mains  to  file  a  full  and  complete  map  show¬ 
ing  their  position  and  size.  All  work  was  to  be  done  under 
permits  from  the  city  and  trenches  were  to  “be  dug  and 
pipes  laid  and  the  trenches  or  ditches  closed  within  the 
shortest  possible  time  within  which  the  same  can  be  done 
with  skilfulness  and  dispatch.”  The  construction  and  repair 
work  in  the  streets  was  to  be  done  under  the  supervision  of 
city  inspectors  and  was  to  be  paid  for  by  the  grantees. 
Service  pipes  were  to  be  placed  at  such  points  as  should  meet 


644 


MUNICIPAL  FRANCHISES. 


the  approval  of  the  property  owners,  but  in  cases  where 
service  pipes  were  already  laid  in  connection  with  the  exist¬ 
ing  system  of  mains,  no  relocation  was  to  be  required  of  the 
company.  Service  pipes  to  the  property  line,  and  curb 
boxes  were  to  be  installed  at  the  expense  of  the  grantees. 
All  necessary  meters  and  safety  devices  were  to  be  furnished 
free  of  charge  to  the  consumers.  It  was  provided,  however, 
that  a  deposit  of  not  more  than  $5  might  be  required  with 
each  meter,  this  sum  to  be  returned  upon  surrender  of  the 
meter  to  the  company  in  good  condition.  Pipes  were  to  be 
relaid  to  suit  any  change  of  grade  in  the  streets.  Materials 
used  by  the  company  were  to  be  of  the  best  quality  and  the 
company’s  mains  were  required  to  be  at  all  times  of  “  suffi¬ 
cient  size  to  render  adequate  service  ”.  The  mains  were  not 
to  interfere  with  the  sewer  or  water  or  other  pipes  already 
laid  and  were  to  be  readjusted  whenever  necessary  to  ac¬ 
commodate  the  laying  of  sewer  or  water  pipes  in  the  future. 
The  company  was  to  comply  with  all  ordinances  and  regu¬ 
lations  concerning  work  in  the  streets.  The  gas  furnished 
was  to  have  a  heat  value  of  at  least  600  British  Thermal 
Units  per  cubic  foot,  and  the  price  charged  to  consumers  was 
never  to  exceed  60  cents  per  1,000  feet,  under  penalty  of  the 
forfeiture  of  the  franchise.  Provision  was  made  for  the 
restoration  of  the  streets  by  the  company  and  for  the  deposit 
of  a  penalty  fund  of  $500  to  be  drawn  upon  in  case  the  city 
had  to  do  the  work  which  should  have  been  done  by  the 
company. 

The  grantees  bound  the  company  to  extend  its  various 
lines  and  mains  so  that  all  the  inhabitants  of  the  city  could 
be  supplied  with  gas  for  fuel  and  lighting  purposes  when 
they  reasonably  required  it.  In  order  to  secure  the  exten¬ 
sions  it  was  necessary  that  a  petition  be  tiled  with  the  board 
of  public  works  signed  by  the  property  owners  in  the  terri¬ 
tory  affected  and  that  the  owners  or  occupants  of  at  least 
three  houses  already  erected  should  bind  themselves  to  make 
five  or  more  stove  or  grate  connections,  or  use  fifteen  or  more 
burners,  for  each  500  feet  of  space  over  which  the  extensions 
were  to  be  made.  Upon  receiving  such  petition,  the  board 
of  public  works  was  to  set  a  day  for  a  public  hearing  and 
might  thereafter  issue  an  order  requiring  the  company  to 
build  the  desired  extensions.  In  case  of  its  refusal,  it  was 


NATURAL  GAS  FRANCHISES. 


645 


to  be  subject  to  a  forfeit  of  $50  a  day  from  the  expiration  of 
the  period  fixed  by  the  board  of  public  works  for  the  com¬ 
pletion  of  the  extension.  The  laying  of  mains  was  not  to  be 
required,  however,  between  November  1  and  April  1,  and 
an  extension  was  not  to  be  ordered  by  the  board  of  public 
works  unless  the  earnings  of  the  company  would  permit  the 
making  of  extensions  after  the  payment  of  a  ten  per  cent  an¬ 
nual  dividend  upon  the  subscribers’  stock  certificates.  After 
the  expiration  of  three  years,  however,  extensions  not  ex¬ 
ceeding  in  the  aggregate  10,000  feet  in  any  one  year  might 
be  ordered  without  regard  to  the  previous  payment  of  divi¬ 
dends.  In  any  case  where  the  extensions  petitioned  for  could 
not  be  made  under  the  preceding  provisions,  the  property 
holders  were  authorized  to  file  a  petition  accompanied  by  an 
agreement  to  take  at  par  for  cash  an  amount  of  capital  stock 
in  the  company  sufficient  to  cover  the  cost  of  the  material 
and  labor  required  for  the  extension,  together  with  the  agree¬ 
ment  of  the  owners  or  occupants  to  take  gas  to  the  same  ex¬ 
tent  as  required  under  the  other  procedure.  On  the  filing 
of  such  petition  with  the  board  of  public  works,  a  day  was 
to  be  set  for  a  public  hearing  and  the  board  was  to  determine 
whether  or  not  the  petition  was  properly  signed,  and  met 
the  other  requirements.  The  cost  of  the  proposed  extension 
was  for  the  purpose  of  this  determination  to  be  according  to 
the  estimate  of  the  city  civil  engineer.  There  was  to  be  no 
appeal  from  the  board’s  determination.  If  the  board  ordered 
an  extension  then  the  company  was  to  offer  the  necessary 
additional  capital  stock  for  sale,  and  in  case  the  stock  was  not 
sold  above  par,  it  was  to  be  taken  by  the  petitioners  at  its 
face  value. 

Any  meter  measuring  more  than  two  per  cent  fast  or  slow 
was  to  be  considered  inaccurate  and  was  not  to  be  used.  The 
board  of  public  works  was  to  have  authority  to  inspect  and 
test  the  meters ‘as  well  as  the  other  apparatus  and  property 
of  the  company  and  also  to  test  the  quality  of  the  gas  and  its 
calorific  and  illuminating  value.  Unsafe  apparatus  or  im¬ 
perfect  meters  were  to  be  immediately  replaced  upon  the 
order  of  the  board.  In  case  the  company  operating  the 
franchise  should  at  any  time  become  insolvent  and  its  prop¬ 
erty  ordered  sold,  the  city  reserved  the  right  to  purchase  it 
by  the  payment  of  the  company’s  bona  fide  indebtedness  and 


646 


MUNICIPAL  FRANCHISES. 


any  unpaid  balance  on  the  outstanding  stock  certificates.  At 
the  expiration  of  the  grant,  in  case  of  purchase  by  the  city, 
the  property  might  be  taken  over  subject  to  mortgage  as 
already  outlined,  or  the  city  might  at  its  option  pay  off  the 
outstanding  stock  certificates  and  take  the  property  free  of 
debt. 

In  a  statement  issued  by  the  Citizens  Gas  Company  of 
Indianapolis  on  October  15,  1908,  accompanying  an  offer 
of  the  last  block  of  its  authorized  capital  stock  for  sale,  the 
secretary  of  the  company  estimated  the  probable  daily 
revenues  of  the  enterprise  at  the  amount  of  $2,321,  of  which 
not  less  than  $1,286  was  to  be  from  the  sale  of  the  by-prod¬ 
ucts,  coke,  tar  and  ammonia.  It  was  announced  that  the 
company  then  had  3,286  shareholders,  most  of  whom  would 
be  consumers  of  the  company’s  gas  and  coke.  It  was  ex¬ 
pected  at  the  time  this  statement  was  issued  that  the  entire 
plant  would  be  completed  and  in  operation  by  August  1,  1909. 

272.  The  city’s  distributing  system  for  natural  gas  leased 
on  failure  of  supply— Toledo. — Two  natural  gas  franchises 
were  passed  by  the  city  council  of  Toledo  on  the  same  date, 
September  6,  1886. 1  Each  of  these  franchises  provided  that 
the  grantee  should  have  the  right  to  occupy  the  streets  for 
the  purpose  of  constructing  and  operating  “  lines  of  gas 
mains  and  branch  pipes  with  the  necessary  feeders  and  serv¬ 
ice  pipes,  drips  and  other  devices  ”  necessary  for  successful 
operation  in  the  delivery  of  natural  or  produced  gas  for  heat¬ 
ing  and  power  purposes.  The  grantees  were  required  to  get 
a  written  permit  from  the  city  civil  engineer  before  ex¬ 
cavating  any  street,  and  it  was  expressly  provided  that  no 
excavation  should  be  made  for  the  purpose  of  laying  pipes  in 
Summit  Street  between  certain  points  unless  specific  per¬ 
mission  by  resolution  of  the  common  council  should  be  first 
granted.  The  grantees  were  authorized,  however,  to  cross 
Summit  Street  with  their  pipes  by  tunneling.  The  usual 
regulations  were  imposed  relating  to  street  work,  repair  of 
pavements,  interference  with  other  sub-surface  structures, 
and  the  protection  of  the  city  from  damages.  In  each  of 
these  franchises  there  was  included  one  rather  unusual  pro¬ 
vision,  namely,  that  the  grantees  should  lay  down  their  mains 

1  Special  Ordinances,  op.  cit.,  p.  48,  to  Northwestern  Ohio  Natural  Gas  Co. ;  and 
p.  57,  to  Toledo  Natural  Gas  Co. 


NATURAL,  GAS  FRANCHISES. 


647 


and  service  pipes,  if  required  to  do  so  by  ordinance,  at  the 
time  when  any  street  or  alley  was  to  be  paved  or  otherwise 
improved.  The  grantees  wTere  required  to  make  connections 
with  their  mains  and  lay  service  pipes  for  consumers  adjacent 
to  their  lines  in  cases  where,  in  the  opinion  of  the  common 
council,  the  amount  of  gas  to  be  consumed  would  justify  the 
laying  of  the  pipes  and  the  making  of  the  connections.  Serv¬ 
ice  pipes  were  to  be  laid  to  the  curb-line  without  expense  to 
the  consumers.  These  franchises  were  to  be  forfeitable  at 
the  option  of  the  common  council  unless  the  grantees  fur¬ 
nished  a  reasonable  supply  of  gas  by  October  1,  1887.  It 
was  provided  that  “  the  right  to  further  regulate  the  fur¬ 
nishing  of  said  natural  gas  to  consumers  shall  be  subject  to 
such  terms  and  conditions  as  said  common  council  and  said 
company  or  corporation  may  hereafter  determine  upon.” 
One  of  the  franchises  contained  the  additional  stipulation 
that  the  grantee  should  within  thirty  days  after  the  passage 
of  the  ordinance  deliver  to  the  city  an  agreement,  in  form 
to  be  approved  by  the  city  solicitor,  accepting  the  ordinance 
and  undertaking  to  perform  its  terms  and  requirements,  and 
“  to  furnish  gas  to  all  persons  requiring  it  in  the  city  of 
Toledo  (so  far  as  said  company  may  be  able),  without  pref¬ 
erence  or  favoritism,  on  equal  terms  and  at  reasonable  prices, 
reference  being  had  to  the  cost  of  producing  and  delivering 
the  same  and  the  prices  for  like  supplies  in  other  cities.” 

The  city  had  granted  a  franchise  for  artificial  gas  to  the 
Toledo  Gas  Light  and  Coke  Company  as  early  as  1854.1  It 
was  provided  in  this  original  franchise  that  “  the  quality  of 
gas  furnished  the  city  shall  not  be  inferior  to  that  furnished 
to  the  cities  of  Detroit,  Chicago  or  Buffalo,”  and  that  the 
price  of  “  good  gas  ”  to  private  consumers  should  not  exceed 
$3.50  per  1,000  feet,  and  the  price  to  the  city  for  street 
lighting  should  be  $1.75  per  1,000.  By  the  terms  of  a  later 
agreement  with  the  same  company  in  1866,  the  price  of  gas 
for  public  lighting  was  to  be  $2.25  during  the  ensuing  period 
of  ten  years,  and  for  private  lighting  during  the  first  five 
years  the  price  was  to  be  $3.50,  and  for  the  second  five  years 
$3.2  These  prices  were  to  include  the  United  States  Revenue 
tax  of  24  cents  per  1,000  cubic  feet,  but  in  case  the  revenue 
tax  was  increased  the  company  was  authorized  to  add  the 


1  Special  Ordinances,  op.  cit.,  p.  67. 


» 1  bid.,  p.  71. 


648 


MUNICIPAL  FRANCHISES. 


excess  to  its  rates,  and  in  case  the  tax  was  decreased,  the 
amount  of  decrease  was  to  be  deducted  from  the  rates.  A 
five  per  cent  discount  was  to  be  allowed  to  private  consumers 
for  cash  payments  made  within  five  days  from  the  rendition 
of  bills.  Meters  were  to  be  furnished  rent  free  except  when 
the  quantity  of  gas  consumed  was  less  than  2,500  cubic  feet 
per  annum,  and  in  such  cases  the  meter  charge  was  not  to 
be  more  than  $3  a  year.  The  company  agreed  to  extend  its 
mains  wherever  required  to  do  so  by  the  city,  but  such  re¬ 
quirement  was  not  to  be  made  unless  the  consumption  of  gas 
by  private  consumers  along  the  lines  of  the  extension  would 
equal  the  consumption  of  “  twelve  average  private  dwelling 
house  consumers  ”  for  every  half  mile  of  pipe. 

The  city  itself  went  into  the  business  of  distributing  nat¬ 
ural  gas,  but  after  awhile  it  was  unable  to  secure  a  further 
supply,  and  by  ordinance  passed  August  19,  1901,  it  leased 
its  plant  to  the  Toledo  Gas  Light  and  Coke  Company  for  a 
period  of  twenty  years.1  This  ordinance  recited  that  the 
city’s  natural  gas  plant  included  approximately  93  miles  of 
iron  supply  pipes  and  approximately  6,000  service  taps,  with 
other  appurtenances.  The  company  was  authorized  to  main¬ 
tain  and  operate  the  plant,  to  make  extensions  and  additions 
to  it  and  to  take  up  the  existing  pipes  and  replace  them  in 
other  locations  as  it  might  deem  best.  It  was  understood, 
however,  that  all  such  changes  were  to  be  made  in  such  a 
way  as  not  to  injure  or  impair  the  usefulness  of  the  plant, 
but  were  to  be  designed  to  render  the  plant  “  more  efficient 
for  supplying  the  citizens  of  Toledo  and  the  consumers  of 
gas  in  said  city  with  better  facilities.”  At  the  termination 
of  the  lease,  the  company  was  to  turn  over  the  plant  to  the 
•city,  subject  to  alterations  and  changes  that  had  been  made, 
in  as  good  condition  as  it  received  it,  “  reasonable  wear  and 
tear,  depreciation  by  electrolysis  and  corrosion  due  to  natural 
causes  and  inevitable  accidents  excepted.”  The  company 
agreed  to  pay  the  city  an  annual  rental  of  $6,500  for  the  use 
of  the  plant.  The  service  pipes  were  to  be  laid  at  the  com¬ 
pany’s  expense  and  to  belong  to  the  company.  Owners  of 
property  upon  which  service  pipes  were  laid  were  required  to 
execute  a  proper  form  of  release  consenting  that  the  pipes 
should  remain  the  property  of  the  company.  Meter  connec- 

1  Special  Ordinances ,  op.  cit p.  80. 


NATURAL  GAS  FRANCHISES. 


649 


tions  were  to  be  furnished  by  the  company  at  its  own  expense. 
The  gas  supplied  for  illuminating  purposes  was  to  be  of  not 
less  than  18  candlepower.  Wherever  the  amount  of  gas  con¬ 
sumed  in  any  one  month  amounted  to  less  than  200  feet  the 
company  was  not  to  be  required  to  render  a  bill  for  the 
amount  consumed,  but  in  lieu  of  such  bill  was  permitted  to 
make  a  service  charge  of  25  cents.  In  case  gas  bills  should 
remain  unpaid  for  ten  days  after  presentation,  the  company 
was  authorized  to  charge  an  additional  15  cents  per  1,000  feet. 

In  case  the  company  should  fail  to  pay  its  rental  promptly 
from  time  to  time,  or  fail  to  perform  any  of  the  other  con¬ 
ditions  of  the  contract,  at  the  option  of  the  city  the  lease 
was  to  be  terminated.  In  case  the  company  should  take  up 
any  portion  of  the  city’s  pipes  or  service  connections,  or  re¬ 
place  them  in  any  other  location,  the  facts  were  to  be  re¬ 
ported  to  the  city  civil  engineer  both  before  and  after  such 
changes  were  made. 

273.  Franchise  exclusive  on  certain  conditions— Erie, 

Pa. — The  Erie  Gas  Light  Company  received  a  charter  and 
franchise  by  a  special  act  of  the  Pennsylvania  legislature 
passed  March  5,  1852. 1  It  was  stipulated  in  this  franchise 
that  if  the  company  should  erect  gas  buildings,  lay  down  and 
construct  gas  pipes  and  other  appurtenances  and  proceed  to 
furnish  the  inhabitants  of  the  city  with  light  from  the  gas 
manufactured  by  the  company  “  at  a  price  not  exceeding  the 
average  rate  charged  by  other  cities,  boroughs  or  towns,  upon 
the  shore  of  Lake  Erie,  whether  in  the  State  of  New  York, 
Ohio  or  Pennsylvania,  wherever  gases  are  manufactured  by 
private  incorporated  companies,”  then  the  privileges  granted 
by  the  act  should  be  “  exclusive  but  not  otherwise.”  In  1867 
the  company’s  franchise  was  extended  to  include  certain 
suburban  territory  lying  within  one  mile  of  the  city  limits. 

By  a  general  act  of  the  Pennsylvania  legislature  passed 
April  29,  1874,  any  gas  company  was  authorized  to  supply 
heat,  light  and  fuel  to  the  territory  named  in  its  articles  of 
association,  which  were  never  to  cover  more  than  a  single 
county,  and  was  given  the  power  of  eminent  domain  for  the 
purpose  of  acquiring  property  necessary  for  its  plant  or  for 
its  lines  of  distribution.2  It  was  required,  however,  to  secure 

1  Digest  of  Laws,  Ordinances  and  Rules ,  City  of  Erie,  op.  cit .,  Part  2,  p.  22. 

*  Ibid.,  Part  1,  p.  91. 


650 


MUNICIPAL  FRANCHISES. 


the  consent  of  the  local  authorities  before  entering  upon  any 
city  street  or  borough  street.  As  amended  later,  this  act 
provided  that  the  franchises  and  privileges  of  a  corporation 
for  the  manufacture  of  gas  for  light  only  should  be  exclusive 
within  the  district  covered  by  the  company’s  charter,  and 
that  no  other  company  should  be  incorporated  for  the  manu¬ 
facture  of  gas  to  supply  light  only  until  the  first  company 
had  realized  from  its  earnings  and  divided  among  its  stock¬ 
holders  during  a  period  of  five  years  a  dividend  equal  to 
eight  per  cent  per  annum  on  its  capital  stock. 

On  March  8,  1885,  the  city  of  Erie  by  an  ordinance  gave 
a  franchise  to  the  Pennsylvania  Gas  Company  to  supply 
natural  gas  for  domestic  and  manufacturing  purposes  to 
public  and  private  buildings  in  the  city.1  It  was  stipulated 
that  all  manufactories  and  public  and  private  buildings  along 
the  line  of  the  company’s  pipes  should  he  furnished  with  ga3 
at  a  uniform  price  for  the  same  service.  In  case  the  com¬ 
pany  consolidated  with  any  other  fuel  gas  company  in  the 
city  it  was  to  forfeit  its  franchise,  and  at  the  request  of 
city  councils  it  was  immediately  to  remove  its  pipes  from  the 
streets.  The  company  agreed  to  furnish  gas  to  the  city  and 
to  public  schools  and  charitable  institutions  at  25  per  cent 
less  than  the  lowest  rates  to  private  consumers.  Gas  so  fur¬ 
nished  was  to  be  for  fuel.  The  company  was  not  required, 
however,  to  make  the  connections,  and  it  was  only  required 
to  furnish  gas  to  buildings  and  institutions  along  the  lines 
of  its  pipes.  It  was  stipulated  that  the  company  should  not 
charge  a  higher  rate  for  the  same  service  than  was  charged 
in  Cleveland  or  Buffalo. 

274.  Price  of  gas  to  be  readjusted  to  new  inventions  and 
improvements  —  Salt  Lake  City. — The  first  gas  franchise 
granted  by  Salt  Lake  City  seems  to  have  been  ordained  by 
the  city  council  on  March  8,  1872. 2  Under  this  ordinance 
the  grantees  were  to  furnish  gas  within  one  year  and  the 
price  of  gas  to  private  consumers  was  not  to  exceed  $4  per 
1,000  feet  during  the  life  of  the  franchise,  which  was  for  a 
term  of  twenty  years.  The  price  of  gas  furnished  to  the 
city  was  not  to  exceed  “the  lowest  average  price  at  which 
gas  shall  or  may  be  furnished  to  the  private  citizens  as  afore- 

1  Digest  of  Laws,  etc.,  op.  cit.,  Part  2,  p.  203. 

*  Ordinances ,  p.  342. 


NATURAL,  GAS  FRANCHISES. 


651 


said/’  It  was  also  provided  that  the  quality  of  gas  so  fur¬ 
nished  “  shall  be  as  good  as  is  or  may  be  furnished  to  any 
other  city  in  any  of  the  territories  of  the  United  States,  or 
in  the  Pacific  States.”  The  city  council  was  authorized  to 
subject  the  gas  from  time  to  time  to  a  test  to  determine  its 
quality.  The  proposed  location  of  the  gas  works  was  to  be 
submitted  to  the  city  council  for  its  approval. 

By  an  ordinance  passed  August  30,  1889,  the  city  council 
granted  to  the  Salt  Lake  City  Gas  Company  a  twenty-five 
year  franchise  on  condition  that  gas  should  be  furnished  to 
private  consumers  at  a  maximum  price  of  $3  per  1,000  and 
to  the  city  at  $2.50.1  Street  lamps  with  six-feet  burners 
were  to  be  furnished,  maintained  and  supplied  with  gas 
at  a  maximum  rate  of  $35  per  annum  for  each  lamp.  The 
quality  of  illuminating  gas  furnished  by  the  company  was  to 
be  not  less  than  16  candlepower,  and  the  company’s  pipes 
were  to  be  extended  and  gas  distributed  “  on  any  and  all 
streets  in  the  city  as  fast  as  there  may  be  any  reasonable 
demand  for  the  same  on  such  streets.” 

A  twenty-year  franchise  for  supplying  natural  gas  was 
granted  by  the  city  on  January  12,  1892,  to  the  American 
Natural  Gas  Company.1  This  gas  was  to  be  used  “for  heat 
and  fuel  only  ”.  Rates  were  not  to  exceed  40  cents  per  1,000 
feet,  and  the  city  council  reserved  the  right  at  any  time  after 
four  years  to  reduce  this  maximum  price  to  30  cents.  It 
was  provided  that  the  franchise  should  be  null  and  void  if 
the  company  failed  to  lay  mains  from  its  gas  wells  to  the 
city  limits  within  one  year ;  or  failed  to  lay  “  at  least  five 
miles  of  main  pipe  not  less  than  five  and  five-eighths  inches 
in  diameter  ”  in  the  streets  of  the  city  within  eighteen 
months;  or  at  any  time  after  eighteen  months  was  unable 
for  a  continuous  period  of  sixty  days  to  “  furnish  a  sufficient 
quantity  of  natural  gas  to  supply  at  least  five  hundred  aver¬ 
age  families  therewith  for  culinary  and  heating  purposes.” 

Six  months  later,  on  July  12,  1892,  the  council  passed 
over  the  mayor’s  veto  another  gas  franchise.2  This  one  gave 
to  the  New  American  Gas  and  Fuel  Company  the  right  to 
supply  both  natural  and  manufactured  fuel  gas  “  for  heat 
and  fuel  only.”  The  maximum  rate  fixed  in  this  ordinance 
was  30  cents  per  1,000  feet.  It  was  stipulated  that  no  more 

1  Ordinances ,  op.  cit p.  845.  *  Ibid.,  p.  854. 


652 


MUNICIPAL  FRANCHISES. 


than  one  main  pipe  should  be  laid  in  any  one  street  “  without 
the  expressed  consent  of  the  city  council.”  The  company 
was  to  use  “  only  the  best  and  most  approved  system  and 
quality  of  pipe  for  their  mains  and  services,”  subject  to  the 
approval  of  the  city  engineer.  The  council  reserved  the 
right  to  levy  upon  the  company  in  addition  to  ordinary  prop¬ 
erty  taxes  “  an  annual  royalty  or  tax  not  exceeding  one  cent 
per  thousand  cubic  feet  upon  all  sales  by  said  company, 
within  the  limits  of  said  city,  of  fuel  gas,  either  natural  or 
manufactured.”  Although  no  reference  is  made  in  this 
grant  to  the  acquisition  by  this  company  of  any  specific 
franchises  granted  prior  to  this  time,  it  is  stipulated  that  this 
grant  shall  not  be  operative  unless  the  company  files  its  ac¬ 
ceptance  and  also  “  a  specific  relinquishment  of  all  other  or 
former  grants,  franchises  or  privileges  now  held  or  claimed 
by  it.”  In  order  to  clinch  the  matter  it  was  added  that  “  this 
franchise,  if  accepted  by  said  company,  shall  operate  as  a 
revocation  of  all  other  grants,  franchises  or  privileges  now 
held  or  claimed  by  said  company  ”. 

By  an  ordinance  passed  May  20,  1893,  the  Salt  Lake  and 
Ogden  Gas  and  Electric  Light  Company  was  given  a  blanket 
franchise  for  the  distribution  of  gas,  electricity  and  steam.1 
The  price  of  manufactured  gas  used  for  illuminating  pur¬ 
poses  was  limited  to  $2.20  per  1,000  feet;  the  price  of  water 
gas,  and  of  manufactured  gas  used  for  fuel  purposes,  to 
$1.50;  and  the  price  of  natural  gas,  to  50  cents.  It  was 
stipulated,  however,  that  any  consumer  should  be  liable  under 
any  of  these  charges  to  pay  the  company  a  minimum  of  one 
dollar  a  month  for  service.  The  city  and  all  hospitals  and 
institutions  used  for  charitable  or  religious  purposes  were  to 
enjoy  a  discount  of  ten  per  cent  from  these  rates.  In  this 
case  also  the  company  was  required  to  relinquish  all  prior 
franchise  rights  upon  the  acceptance  of  the  ordinance. 

On  November  22,  1894,  the  city  granted  another  franchise 
to  the  New  American  Gas  and  Fuel  Company  authorizing 
the  company  for  a  period  of  twenty  years  to  operate  pipe 
lines  for  distributing  both  natural  and  manufactured  gas 
“  for  sale  to  consumers  generally  ”.2  Rates  for  natural  gas 
were  not  to  exceed  50  cents  per  1,000  feet  for  the  first  two 
years,  and  after  that  time  the  price  could  be  reduced  by  the 

1  Ordinances,  op.  cit p.  357.  *  Ibid.,  p.  371. 


NATURAL  GAS  FRANCHISES. 


653 


city  council  to  30  cents.  For  manufactured  gas,  rates  were 
limited  to  a  maximum  of  $1.25.  The  company  was  expressly 
required  to  lay  its  pipe  lines  on  both  sides  of  the  streets 
where  gas  was  used  and  not  to  cross  the  streets  with  its  serv¬ 
ice  pipes  except  by  permission  of  the  city  council.  This 
ordinance  was  to  be  void  unless  the  company  should  within 
five  months  lay  a  pipe  line  not  less  than  six  inches  in  diam¬ 
eter  from  its  gas  wells  to  East  Temple  Street  in  the  city. 

Not  satisfied  with  granting  all  the  gas  franchises  which  I 
have  described,  Salt  Lake  City,  on  September  7,  1905,  passed 
an  ordinance  giving  to  George  A.  Snow  and  William  Darst 
a  fifty-year  right  to  construct,  maintain  and  operate  gas 
works  and  to  use  the  streets  for  the  distribution  of  manufac¬ 
tured  gas  for  fuel  and  illuminating  purposes.1  The  rate 
for  fuel  gas  was  limited  to  85  cents  and  the  rate  for  illumi¬ 
nating  gas  to  $1.35,  with  a  discount  of  ten  cents  on  the  latter 
for  prompt  payment.  A  minimum  monthly  charge  of  one 
dollar  for  each  consumer  was  permitted,  however.  After  the 
expiration  of  the  first  three  years,  the  grantees  were  to  pay  the 
city  one  per  cent  of  their  gross  receipts  for  the  succeeding 
ten  years;  one  and  one-half  per  cent  for  the  next  ten  years, 
and  two  per  cent  thereafter.  In  any  case,  however,  these 
payments  were  not  to  be  less  than  $1,000  a  year.  It  was 
stipulated  that  the  gas  furnished  should  “  equal  in  efficiency 
the  general  standard  of  efficiency  of  gas  used  for  like  pur¬ 
poses  in  the  cities  of  New  York,  Chicago  and  Philadelphia  ”. 
The  grantees  also  agreed  that  their  mains,  service  pipes,  ap¬ 
paratus  and  system  should  be  “  up  to  the  approved  standard 
used  in  the  United  States.”  They  were  required  to  accept 
the  ordinance,  if  at  all,  within  sixty  days  after  its  approval; 
to  commence  work  within  six  months  after  acceptance;  to 
have  twenty  miles  of  mains  laid  within  two  years  and  to  lay 
ten  additional  miles  each  year  for  the  two  years  thereafter. 
Gas  was  to  be  delivered  within  three  years  from  the  date 
of  acceptance  of  the  ordinance.  It  was  provided,  however, 
that  “  no  delay  occasioned  by  act  of  God,  the  elements, 
strikes,  lockouts,  or  inability  to  procure  with  reasonable 
diligence  the  delivery  of  machinery,  pipes,  apparatus  and 
supplies  ”  should  be  counted  as  a  part  of  the  time  within 

1  Typewritten  copy  of  this  franchise  was  furnished  to  the  author  by  the  City 
Recorder  of  Salt  Lake  City. 


654 


MUNICIPAL  FRANCHISES. 


which  any  act  required  under  the  terms  of  the  franchise  was 
to  be  performed.  The  grantees  were  authorized  to  “  require 
at  their  reasonable  discretion,  a  guarantee  deposit  from 
parties  proposing  to  become  consumers,  the  amount  of  which 
Baid  deposit  shall  be  reasonable  under  the  circumstances 
under  which  said  consumer  proposes  to  use  gas.”  The  de¬ 
posit,  with  interest  at  six  per  cent  per  annum,  was  to  be  re¬ 
turned  to  the  consumer  when  he  stopped  using  gas.  The  city 
agreed  that  it  would  not  by  ordinance  or  resolution  passed 
during  the  life  of  this  franchise  “  make  any  rules  or  regu¬ 
lations  in  regard  to  the  price  of  gas  to  be  furnished  for  light¬ 
ing  or  heating  purposes  different  from  the  prices  ”  named 
in  the  ordinance.  It  was  provided,  however,  that  “  if  there 
shall  hereafter  be  any  new  inventions,  or  improvements  or 
condition  that  will  materially  reduce  the  cost  of  producing 
or  distributing  gas  for  lighting  or  heating  purposes,  then 
and  in  either  event  there  shall  be  a  reasonable  readjust¬ 
ment  ”  of  the  rates  fixed.  The  question  as  to  whether  or  not 
conditions  authorizing  the  readjustment  had  arisen,  as  well 
as  the  terms  of  any  such  readjustment,  were  in  the  event 
of  any  disagreement  between  the  city  and  the  company  to  be 
determined  by  “  two  competent  and  disinterested  appraisers,” 
the  city  and  the  grantees  each  selecting  one.  These  ap¬ 
praisers  were  to  select  an  umpire,  and  then  if  they  were  un¬ 
able  to  agree  in  regard  to  the  matters  submitted  to  them,  the 
umpire  was  to  be  called  in  and  the  majority  of  the  three 
would  decide  the  question.  In  case  of  the  refusal  or  neglect 
of  the  grantees  to  proceed  to  arbitration  when  requested  by 
the  city  council,  the  city  reserved  the  right  to  alter,  amend 
and  change  the  franchise  in  respect  to  rates.  Free  gas  suffi¬ 
cient  to  heat  the  public  library,  two  fire  stations,  the  city 
jail,  the  police  station,  the  old  City  Hall  and  the  city’s  half 
of  the  city  and  county  building  was  to  be  furnished  by  the 
grantees,  and  this  obligation  was  to  extend  to  the  buildings 
not  only  as  they  existed  at  the  time,  but  as  they  might  there¬ 
after  be  “  rebuilt,  improved,  added  to  or  repaired.” 

By  an  ordinance  approved  February  21,  1906,  this  fran¬ 
chise  was  amended  in  certain  particulars.  Among  other 
things,  the  maximum  price  of  gas  used  for  fuel  was  increased 
from  a  flat  rate  of  85  cents  per  1,000  to  a  sliding  rate  coming 
down  from  $1  per  1,000  for  the  first  2,000  cubic  feet  per 


NATURAL  GAS  FRANCHISES. 


655 


month  furnished  to  any  one  consumer  through  any  one 
meter,  to  80  cents  per  1,000  feet  for  all  gas  furnished  in  ex¬ 
cess  of  22,000  cubic  feet  per  month  to  one  consumer 
through  one  meter.  The  price  of  gas  used  for  illumi¬ 
nating  purposes  was  also  changed  from  a  flat  rate  to  a  sliding 
rate.  For  the  first  2,000  cubic  feet  per  month  furnished 
any  one  consumer  through  any  one  meter  the  price  was  to  be 
$1.40  per  1,000,  and  for  all  gas  in  excess  of  that  amount,  the 
price  was  to  be  $1.30  per  1,000  feet.  After  the  expiration  of 
twenty-five  years  all  these  rates  were  to  be  reduced  to  the 
extent  of  ten  cents  per  1,000  feet.  There  was  also  at  all 
times  to  be  allowed  the  ordinary  ten-cent  discount  for  prompt 
payment.  It  was  provided  that  unless  the  grantees  filed  a 
new  bond  or  filed  the  written  consent  of  their  original  bonds¬ 
men  to  the  changes  in  the  franchise,  the  amendment  would 
be  void.  It  was  further  stipulated  that  if  the  grantees,  or  a 
Utah  corporation  to  which  the  franchise  might  be  assigned, 
should  after  having  constructed  and  put  in  operation  the 
gas  plant  and  distributing  system,  as  contemplated  in  the 
franchise,  desire  to  sell  their  works,  the  city  should  have  “  an 
option  to  purchase  at  a  price  equivalent  to  any  bona  fide 
offer  which  can  be  obtained  from  other  parties.”  This  option 
was  to  last  for  ninety  days  after  notice  of  the  offer. 

27  5.  Rates  reduced  with  increase  of  sales  —  Detroit.— 
The  present  franchise  of  the  Detroit  Gas  Company  was  ap¬ 
proved  October  31,  1893.1  It  was  a  blanket  franchise  giving 
the  right  to  supply  either  manufactured  or  natural  gas  for 
illuminating  and  fuel  purposes.  The  company  was  required 
to  supply  all  applicants,  not  in  arrears  for  prior  bills,  owning 
or  occupying  premises  on  streets  in  which  the  company’s 
mains  were  laid.  Extensions  were  to  be  made,  if  ordered 
by  the  council,  on  petition  of  two  applicants  “  averaging  two 
buildings  in  every  200  feet  of  main  pipe  required.”  It  was 
stipulated  that  if  the  company  should  at  any  time  cease  to 
furnish  natural  gas,  and  undertake  to  supply  a  cheaper 
quality  of  gas  for  fuel  than  that  furnished  for  lighting,  the 
price  to  be  charged  for  such  manufactured  fuel  gas  was  to 
be  determined  by  arbitration.  Pipes  were  to  be  laid  between 
the  curb  line  and  the  lot  line  wherever  practicable,  or  pref¬ 
erably  in  the  alleys.  All  service  pipes  put  in  by  the  com- 

1  Compiled  Ordinances,  1904,  op  cit.,  p.  407. 


656 


MUNICIPAL  FRANCHISES. 


pany  after  the  date  of  its  franchise  were  to  be  connected 
only  with  the  main  laid  in  the  alley  or  at  the  side  of  the 
street  nearest  to  the  building  which  was  to  be  supplied. 
There  were  the  usual  provisions  to  prevent  the  company 
from  injuring  other  sub-surface  structures  and  to  require 
the  company’s  street  work  to  be  done  under  the  supervision 
of  the  city.  The  paving  replaced  by  the  company  was  to 
be  kept  in  repair  for  a  period  of  three  years  unless  the  street 
was  repaved  or  generally  repaired  at  an  earlier  date.  It  was 
especially  stipulated  that  in  all  cases  where  the  work  required 
the  exercise  of  skill,  as  in  the  laying  or  relaying  of  pave¬ 
ments  or  sidewalks,  the  company  should  “  employ  none  but 
skilled  workmen,  familiar  with  the  execution  of  such  work.” 
The  city  reserved  the  option  to  do  the  work  of  restoring  the 
streets' itself,  if  it  so  desired,  at  the  company’s  expense.  The 
maximum  rates  fixed  in  this  ordinance  were  33  cents  per 
1,000  feet  for  natural  gas  sold  for  fuel,  with  a  discount  of 
3  cents  on  bills  paid  at  any  time  during  the  month  following 
the  month  for  which  the  bills  were  rendered;  90  cents  per 
1,000  feet  for  manufactured  gas  sold  for  fuel  purposes  from 
illuminating  mains,  with  a  discount  of  10  cents  for  payment 
within  the  following  month;  and  $1.40  per  1,000  feet  of 
manufactured  gas  used  for  lighting,  with  a  gradual  decrease 
to  95  cents  per  1,000  whenever  the  aggregate  quantity  sup¬ 
plied  by  the  company  was  greater  than  800,000,000  cubic 
feet  per  annum,  with  a  discount  of  15  cents  per  1,000  for 
payment  within  the  month  following  the  consumption.  It 
was  provided  that  the  city  should  as  soon  as  practicable  be 
divided  by  the  company  into  three  districts  which  should  be 
as  nearly  equal  as  practicable  in  the  numbers  of  the  com¬ 
pany’s  consumers.  Bills  were  to  be  rendered  to  consumers 
in  the  first  district  on  or  before  the  25th  day  of  each  month ; 
in  the  second  district,  on  or  before  the  5th  of  each  month; 
and  in  the  third  district,  on  or  before  the  15th  of  each  month. 
Discounts  were  to  be  allowed  to  consumers  who  paid  within 
15  days  after  the  time  fixed  for  the  rendering  of  bills.  Each 
bill  was  to  state  the  number  of  cubic  feet  of  gas  used  by 
the  consumer  during  the  period  covered  by  the  bill,  the  aver¬ 
age  illuminating  power  of  the  gas,  the  amount  due  the  com¬ 
pany  at  the  rate  specified  in  the  ordinance,  and  the  discount 
to  which  the  consumer  would  be  entitled  if  the  bill  were 


NATURAL  GAS  FRANCHISES. 


657 


paid  within  the  specified  discount  period.  For  refusal  to 
pay  bills  the  company  was  authorized  to  cut  off  any  con¬ 
sumer’s  supply  of  gas,  but  it  could  not  refuse  to  furnish  illu¬ 
minating  gas  on  account  of  a  consumer’s  failure  to  pay 
bills  for  natural  gas.  No  meter  could  be  removed  by  the 
company  from  any  premises  supplied  by  it  without  the  con¬ 
sumer’s  consent  unless  24  hours’  written  notice  had  been 
given.  Meters  could  be  removed  only  between  8  o’clock  in 
the  morning  and  2  o’clock  in  the  afternoon.  Service  pipes 
were  to  be  maintained  by  the  company  to  the  lot  line.  Inside 
the  lot  line  the  company  was  entitled  to  charge  the  cost  of 
furnishing  and  laying  service  pipes,  such  cost  not  to  exceed 
15  cents  per  lineal  foot.  The  illuminating  gas  supplied  was 
to  have  18  candlepower  and  the  pressure  was  to  be  “  proper 
and  reasonable,”  and  at  all  times  subject  to  the  inspection 
and  approval  of  the  board  of  public  works.  The  board  was 
authorized  to  remove  any  of  the  company’s  meters  at  any 
time  for  testing  purposes,  and  the  company  might  be  re¬ 
quired  to  supply  other  meters  for  use  during  the  time  of 
inspection.  Any  consumer  was  to  have  the  right  to  have 
his  meter  inspected  on  the  payment  of  a  fee  of  $1.  In  case 
any  meter  was  found  to  register  inaccurately  to  the  injury 
of  the  consumer  to  an  extent  exceeding  two  per  cent,  this  fee 
would  be  returned  to  him.  If  the  consumer’s  meter  were 
found  to  be  correct,  however,  the  fee  was  to  be  divided 
equally  between  the  city  and  the  gas  company.  The  com¬ 
pany  was  required  to  make  semi-annual  detailed  sworn 
statements  to  the  city  showing  the  amount  of  manufactured 
gas  for  illuminating  purposes  sold  by  it.  The  company’s 
books  were  to  be  open  to  inspection  by  the  city  controller  or 
his  representatives  for  the  purpose  of  verifying  these  re¬ 
ports.  The  company  was  also  required  to  furnish  promptly 
to  the  board  of  public  works  any  information  asked  for  by 
the  board  in  regard  to  the  size,  location,  condition  or  depth 
of  any  of  the  company’s  mains,  service  pipes  or  meters. 

The  franchise  was  granted  for  a  period  of  thirty  years 
and  the  city  reserved  the  right  to  purchase  the  entire  plant 
at  the  expiration  of  that  time  at  a  price  to  be  determined 
by  a  board  of  nine  arbitrators,  three  of  whom  were  to  be 
appointed  by  the  company,  three  by  the  mayor  of  the  city, 
and  three  by  the  six  thus  appointed.  In  case,  however,  the 


658 


MUNICIPAL  FRANCHISES. 


six  first  appointed  were  unable  to  agree  upon  the  remaining 
three,  the  latter  were  to  be  appointed  by  the  circuit  court 
of  Wayne  County.  The  arbitrators,  in  arriving  at  a  fair 
price  for  the  plant,  were  not  to  take  into  consideration  the 
value  of  the  franchise,  but  were  to  allow  a  fair  value  of  the 
property  actually  used  by  the  company  in  its  business,  and 
to  take  into  consideration  as  an  element  of  value  “the  earn¬ 
ing  capacity  of  the  said  property  and  business,  as  then  es¬ 
tablished  and  existing.”  It  was  stipulated  that  the  com¬ 
pany  should  file  its  written  acceptance  of  the  ordinance 
within  five  days  after  its  approval  by  the  mayor,  and  that 
such  acceptance  should  be  deemed  a  relinquishment  by  the 
company  of  any  prior  franchises  or  rights  claimed  by  it,  so 
that  this  ordinance  should  constitute  the  company’s  sole  and 
only  authority  for  maintaining  any  gas  pipes  in  the  streets. 
The  company  was  forbidden  to  enter  into  any  combination 
with  any  other  gas  company  concerning  rates  to  be  charged 
or  to  make  any  division  of  territory  with  any  other  gas  com¬ 
pany.  The  company  was  expressly  authorized  to  use  in  its 
business  all  the  pipes,  mains,  plants  and  other  property 
which  it  had  theretofore  or  might  thereafter  acquire  by 
purchase  from  other  gas  companies. 

On  May  8,  1906,  this  ordinance  was  amended,  with  the 
consent  of  the  company,  so  as  to  provide  for  the  immediate 
reduction  of  the  price  of  manufactured  gas  to  the  minimum 
fixed  in  the  original  ordinance,  with  rates  to  be  still  lower 
for  large  consumers.  The  maximum  rate  as  provided  by  this 
amendment  was  to  be  90  cents  per  1,000  cubic  feet,  with  a 
discount  of  10  cents  for  prompt  payment.  This  rate  was 
to  apply  to  any  consumer  who  used  no  more  than  50,000 
cubic  feet  per  month.  For  consumers  using  more  than  this 
minimum,  however,  the  rate  for  the  second  50,000  cubic  feet 
was  to  be  80  cents,  with  the  discount;  the  rate  for  the  second 
100,000  cubic  feet  was  to  be  70  cents,  with  the  discount ;  and 
the  rate  for  all  gas  consumed  in  excess  of  200,000  cubic  feet 
per  month  was  to  be  60  cents,  with  the  discount.  A  special 
rate  of  70  cents  with  the  usual  discount,  was  made  for  all  gas 
used  for  the  purpose  of  operating  gas  engines.  It  was  ex¬ 
pressly  provided  that  the  company  might  lower  the  rates  con¬ 
tained  in  this  sechedule  at  any  time,  but  if  the  rates  were 
lowered  they  could  not  be  raised  again  to  the  schedule  of  the 


NATURAL  GAS  FRANCHISES. 


659 


ordinance  without  the  consent  of  the  common  council.  It 
was  also  provided  that  the  company  should  not  charge  any 
consumer  a  different  rate  from  that  charged  to  any  other 
consumer  and  should  not  in  any  way,  by  the  granting  of  re¬ 
bates  or  otherwise,  discriminate  among  its  consumers,  except 
according  to  the  specific  provisions  of  the  ordinance. 

Up  to  the  time  of  this  amendment  the  company,  although 
no  longer  furnishing  natural  gas,  had  maintained  two  sets 
of  meters  for  keeping  separate  account  of  the  gas  used  for 
lighting  and  the  gas  used  for  fuel.  With  the  passage  of  this 
amendment,  however,  the  company  was  not  to  be  required 
any  longer  to  keep  a  separate  account  of  the  gas  sold  for 
illuminating  purposes. 

276.  An  85-cent  rate  ordinance  passed  over  the  mayor’s 
veto  —  Chicago. — On  February  14,  1906,  the  city  council  of 
Chicago  passed  over  the  veto  of  Mayor  Edward  F.  Dunne 
an  ordinance  regulating  the  price  of  gas.1  This  ordinance 
had  been  recommended  by  the  council  committee  on  gas,  oil 
and  electric  light,  after  two  or  three  months  of  consideration 
and  the  taking  of  considerable  expert  testimony.  The  gen¬ 
eral  assembly  of  Illinois  had,  in  1905,  passed  an  act  authoriz¬ 
ing  the  city  to  establish  “  just  and  reasonable  ”  maximum 
rates  for  gas  and  electricity.  Under  the  ordinance  as  recom¬ 
mended  by  the  committee  and  passed  by  the  council,  it  was 
provided  that  no  company  supplying  gas  for  illuminating  or 
fuel  purposes,  should  charge  during  the  ensuing  five  years 
more  than  85  cents  per  1,000  cubic  feet  of  gas  consumed. 
This  was  to  be  a  net  price,  however,  and  an  additional  10 
cents  per  1,000  feet  might  be  charged  consumers  who  failed 
to  pay  within  ten  days  from  the  dates  of  their  gas  bills.  The 
illuminating  gas  furnished  was  to  be  of  not  less  than  22 
candlepower,  to  be  measured  at  the  place  of  consumption 
“  by  the  most  modern  appliances  known  to  science  for 
measuring  the  candlepower  of  illuminating  gas  ”.  The  rate 
for  gas  furnished  to  the  city  was  to  be  85  cents  regardless 
of  the  date  of  payment.  A  penalty  of  from  $25  to  $200  was 
prescribed  for  the  removal  of  a  gas  meter  from  the  premises 
of  any  consumer  without  his  consent,  if  he  was  willing  to  pay 
the  established  rate  for  gas.  It  was  provided,  however,  that 
meters  might  be  removed  for  repairs,  but  in  such  cases  they 

1  Proceedings  of  the  City  Council ,  Feb.  14,  1906,  p.  2639. 


660 


MUNICIPAL  FRANCHISES. 


were  to  be  replaced  or  new  meters  substituted  within  24 
hours  after  removal.  Any  company  manufacturing  or  dis¬ 
tributing  gas  was  authorized  to  purchase  gas  from  any  other 
similar  company,  or  to  sell  gas  to  such  company.  Any  gas 
company  was  authorized  to  lease  its  property  and  mains  to 
any  other  gas  company,  or  to  acquire  and  operate  the  prop¬ 
erty  of  other  companies  for  the  purpose  of  manufacturing 
and  distributing  gas.  It  was  provided,  however,  that  no 
purchase,  sale  or  lease  should  ever  be  construed  as  being  an 
abandonment  of  any  company’s  ordinance  rights,  nor  as 
authorizing  the  assignment  of  the  franchise.  It  was  ex¬ 
pressly  provided  that  no  purchase  or  sale  contract,  agree¬ 
ment  or  lease  authorized  by  the  ordinance  should  operate  to 
deprive  the  state,  city  or  other  governmental  agency  of  the 
right  to  regulate  rates  after  the  expiration  of  the  five-year 
period,  and  the  companies  accepting  the  ordinance  agreed 
that  they  would  not  urge  any  of  its  provisions,  or  any  pur¬ 
chase,  sale  or  agreement  authorized  by  it  for  the  purpose  of 
fixing  any  higher  price  or  lower  quality  of  gas  than  the  price 
or  quality  which  might  be  fixed  at  any  time  after  the  ex¬ 
piration  of  the  five  years.  It  was  provided,  however,  that 
none  of  the  companies  accepting  the  ordinance  would  by 
such  acceptance  concede  the  right  of  the  city  to  regulate 
rates. 

Under  the  franchises  of  two  of  the  existing  companies  the 
city  had  reserved  the  right  to  purchase  the  companies’ 
plants  upon  certain  conditions.  It  was  expressly  stipulated 
in  this  ordinance  that  the  city’s  rights  in  this  respect  should 
not  be  prejudiced  by  the  ordinance  under  discussion.  The 
two  companies  referred  to,  however,  were  released  from  the 
payment  of  compensation  to  the  city  under  the  terms  of  their 
respective  ordinances,  except  that  the  tax  of  five  per  cent  of 
the  gross  receipts  from  the  sale  of  natural  gas  was  not  to  be 
abrogated.  It  was  stipulated  that  the  amount  due  from  the 
People’s  Gas  Light  and  Coke  Company,  by  far  the  most  im¬ 
portant  gas  company  of  the  city,  up  to  the  time  of  the  taking 
effect  of  this  ordinance,  being  five  per  cent  of  its  gross 
revenue  from  the  sale  of  natural  gas,  should  be  paid  by 
crediting  it  against  the  sum  of  more  than  $1,300,000  due  the 
company  from  the  city  for  gas  furnished  for  street  lighting, 
and  the  city  was  to  be  released  from  any  payment  due  the 


NATURAL  GAS  FRANCHISES. 


061 


company.  The  Ogden  Gas  Company  was  to  pay  the  city  the 
amount  due  under  its  ordinance,  a  sum  in  excess  of  $117,000. 
The  city’s  accounts  with  the  Universal  Gas  Company  were 
to  be  settled,  and  each  party  released  from  its  accrued  obli¬ 
gations  to  the  other.  Litigation  that  had  been  started  by 
the  city  against  two  of  the  companies  was  to  be  dismissed. 
The  ordinance  was  not  to  be  considered  as  extending  the 
period  within  which  any  of  the  companies  were  authorized 
under  their  franchises  to  supply  gas. 

Mayor  Dunne  objected  to  this  ordinance  for  several  rea¬ 
sons.  He  thought  that  the  gas  companies  should  not  be  given 
24  hours  in  which  to  replace  their  meters  removed  for  repair, 
but  that  they  should  be  required  to  substitute  other  meters 
immediately.  He  urged  that  under  the  section  permitting 
companies  to  lease  each  other’s  property,  “  the  Standard  Oil 
Company  or  any  company  organized  under  the  liberal  laws 
of  New  Jersey,  Delaware  or  any  other  state  would  be  em¬ 
powered  to  take  possession  of  the  gas  plants  now  being  oper¬ 
ated  in  the  city  of  Chicago  and  conduct  them  without  limi¬ 
tation  as  to  time  in  the  same  manner  that  domestic  corpora¬ 
tions  of  this  city  could  conduct  them,”  and  in  so  doing  would 
acquire  the  right  to  have  all  questions  arising  between  the 
companies  and  the  city  determined  exclusively  in  the  Federal 
courts.  “  I  can  discover  no  good  reasons,”  said  the  mayor, 
“  why  the  public  utilities  of  this  city  as  long  as  they  are 
allowed  to  remain  in  the  hands  of  private  companies  should 
not  be  administered  by  corporations  which  are  subject  to  the 
exclusive  jurisdiction  of  the  state  courts.”  The  mayor  also 
objected  to  the  clause  by  which  the  company  reserved  the 
right  to  contest  the  city’s  authority  to  regulate  rates  after 
the  expiration  of  the  five-year  period.  “  This  ordinance  ”, 
said  the  Mayor,  “  is  either  a  contract  ordinance  which  should 
settle  all  controversies  between  the  present  companies  and 
the  city,  in  which  event  the  companies  should  be  compelled  to 
acknowledge  the  right  of  the  city  to  regulate  the  price  and 
quality  of  gas,  or  it  is  not  a  contract  but  a  regulating  ordi¬ 
nance  in  which  the  city  should  under  the  law  affirm  its 
right  to  fix  the  price  and  quality  of  gas  and  compel  the 
companies  to  accede  to  its  terms  without  conceding  to  the 
companies  the  right  to  question  its  validity.” 

An  ordinance  had  been  passed  in  the  year  1900  fixing  the 


662 


MUNICIPAL  FRANCHISES. 


price  of  gas  at  75  cents.  The  companies  had  contested  the 
validity  of  this  ordinance  and  although  the  new  ordinance 
provided  that  the  rights  of  the  city  and  of  citizens  to  recover 
any  excess  over  the  75-cent  rate  which  they  had  been  un¬ 
lawfully  compelled  to  pay  were  not  surrendered,  in  another 
clause  the  new  ordinance  acknowledged  the  city’s  indebtedness 
to  the  People’s  Gas  Light  and  Coke  Company  for  upwards  of 
$1,300,000,  based  upon  the  company’s  claim  for  a  rate  of  $1 
per  1,000  from  the  year  1900  on.  The  mayor  objected  to  this 
apparent  admission  of  the  invalidity  of  the  75-cent  rate  ordi¬ 
nance.  Furthermore,  the  mayor  objected  to  the  new  ordi¬ 
nance  on  the  ground  that  the  85-cent  rate  fixed  by  it  was 
unfair  to  the  people  and  excessive. 

As  already  stated,  the  mayor’s  objections  were  overruled 
and  the  ordinance  was  repassed  by  the  council.  The  vote 
was  57  to  10. 


End  of  Volume  One. 


ANNOUNCEMENT. 


The  second  volume  of  this  work  will  include  parts  3  and  4. 
Part  3  will  contain  an  analysis  and  discussion  of  local, 
transportation  franchises  including  street  railways,  interurban 
lines,  terminal  railroads,  subways,  elevated  lines,  freight 
tunnels,  ferries,  coach  and  cab  lines,  bridges  and  turnpikes 
and  toll  roads. 

Part  4  will  comprise  the  chapters  discussing  taxation  and 
control  of  municipal  franchiss,  including  the  following  sub¬ 
jects  : 

Constitutional  and  statutory  limitations  on  local  franchise 
grants. 

Popular  control  of  franchises  through  the  Initiative  and 
Referendum, 

The  function  of  public  service  commissions, 

Municipal  franchise  bureaus  and  public  utility  experts. 
Relation  of  franchises  to  land  values. 

Principles  of  franchise  taxation, 

Capitalization  of  franchise  utilities, 

Appraisal  of  public  utility  properties, 

Municipal  operation  or  public  regulation. 

It  is  expected  that  Volume  Two  will  be  ready  within  one 
year  after  the  publication  of  Volume  One. 


663 


PARTIAL  LIST  OF  SOURCES  USED  AND  AUTHORITIES  CON¬ 
SULTED  IN  THE  PREPARATION  OF  VOLUME  ONE, 
ARRANGED  FOR  THE  MOST  PART  BY  CITIES. 

Note — Where  information  in  regard  to  particular  cities  has  been 
found  in  general  works,  such  as  the  National  Civic  Federation 
Report,  the  Government  Reports  on  Pneumatic  Tubes,  or  the  Special 
Report  of  the  Baltimore  Electrical  Commission,  no  references  appear 
in  the  following  list  under  the  various  particular  cities  affected. 

ANN  ARBOR,  MICH.:  Charter  and  Ordinances,  1908,  compiled  by 
J.  W.  Dwyer  and  S.  W.  Beakes. 

ATLANTIC  CITY :  Franchise  of  the  Atlantic  City  Sewerage 
Company,  Dec.  30,  1905. 

AUSTIN,  TEX,:  Sewer  franchise  of  the  Lewis  Mercer  Construc¬ 
tion  Company,  June  29,  1892. 

BALTIMORE:  ‘‘Report  of  the  Electrical  Commission  of  Bal¬ 
timore  City,”  on  a  general  subway  system,  Dec.  16,  1896;  “Public 
Service  Corporations  of  Baltimore  City:  A  Compilation  of  the 
Public  and  Private  Grants  of  Rights,  Franchises,  Easements,  Privi¬ 
leges  and  Immunities  to  the  Various  Public  Service  Corporations 
Engaged  in  the  Public  Utilities  of  Baltimore  City,  compiled  by 
Charles  Pielert,  1908  ”;  Report  of  the  Chief  Engineer  to  the  Elec¬ 
trical  Commission  of  Baltimore  for  the  Years  1898  to  1905;  Bal¬ 
timore  News,  clippings  from  various  issues  of  May  and  June, 
1909,  relative  to  the  natural  gas  proposition  of  the  Consolidated 
Gas,  Electric  Light  and  Power  Company;  The  Natural  Gas  Ordi¬ 
nance,  1909,  published  by  the  company. 

BIRMINGHAM,  ALA.:  Franchises,  Contracts  and  Special  Ordi¬ 
nances  of  the  Cty  of  Birmingham,  Ala.,  compiled  by  John  B. 
Weakley,  1907. 

BOISE,  IDA.:  Letter  to  author  from  B.  S.  Howe,  Secretary  of 
the  Boise  Artesian  Hot  and  Cold  Water  Company,  Limited,  May, 
1909. 

BOSTON :  “  The  Boston  Consolidated  Gas  Company,”  by  J.  L. 
Richards  in  The  Annals  for  May,  1908. 

BUFFALO:  Annual  Messages  of  Mayor  James  N.  Adam,  1906, 
1907,  1908;  Report  of  the  Corporation  Counsel  to  the  Common 
Council  relative  to  Franchise  Rights  of  the  Cataract  Power  and 
Conduit  Company,  Sept.  12,  1908;  Franchises  granted  to  the  Brush 
Electric  Light  Company  of  Buffalo,  the  United  States  Electric 
Lighting  Company  of  New  York,  and  the  Thomson-Houston  Electric 
Light  and  Power  Company  of  Buffalo,  now  constituting  the  Buffalo 
General  Electric  Company,  reprinted  May,  1905. 

BUTTE,  MONT.:  Franchise  Ordinances,  being  pages  419  to  578 
of  City  Ordinances,  published  about  1902. 

664 


% 


LIST  OF  AUTHORITIES. 


665 


CALIFORNIA:  Corporation  Laws,  1907,  compiled  by  C.  F.  Curry; 
Constitution  of  the  United  States  and  of  the  State  of  California 
and  other  documents,  compiled  by  C.  F.  Curry,  1907. 

CEDAR  RAPIDS,  IA. :  Revised  Ordinances,  1906. 

CHICAGO:  American  Magazine ,  Dee.,  1908,  Article  by  Miss  Tar- 
bell  on  the  Chicago  traction  ordinances;  Ordinance  granting 
privileges  to  the  Chicago  Telephone  Company,  and  Ordinance  regu¬ 
lating  telephone  charges,  passed  by  the  City  Council  Nov.  6,  1907 ; 
Report  of  the  Committee  on  Gas,  Oil  and  Electric  Light  relative  to 
the  establishment  of  maximum  rates  to  be  charged  by  the  Chicago 
Edison  Company  and  the  Commonwealth  Electric  Company, 
March  26,  1906,  published  in  proceedings  of  the  Common  Council  of 
that  date,  pages  3216  to  3259;  Ordinance  governing  rates  to  be 
charged  by  the  Commonwealth  Edison  Company  recommended  by 
the  Committee  on  Gas,  Oil  and  Electric  Light  in  a  report  to  the  City 
Council  March  5,  1908;  An  Ordinance  prescribing  the  Maximum 
Rates  for  Electricity  to  be  charged  by  the  Commonwealth  Edison 
Company  for  the  period  of  years  ending  July  31,  1*912,  passed  by 
the  City  Council  March  23,  1908:  “Telephone  Service  and  Rates”, 
Report  of  the  Committee  on  Gas,  Oil  and  Electric  Light  to  the 
City  Council  of  Chicago,  September  3,  1907 ;  Ordinance  granting 
rights  to  the  Commonwealth  Electric  Company,  passed  June  28, 
1897 ;  Franchise  of  the  Western  Edison  Light  Company,  passed 
March  28,  1887 ;  Report  of  the  Committee  on  Gas,  Oil  and  Electric 
Light  to  the  City  Council,  Jan.  29,  1906,  relative  to  an  Ordinance  fix¬ 
ing  the  price  of  gas;  Ordinance  regulating  the  price  of  gas,  passed 
over  the  Mayor’s  veto,  Feb.  14,  1906,  together  with  the  Mayor’s  veto 
message,  published  in  the  proceedings  of  the  City  Council,  pages 
2635  to  2643;  Report  to  Commissioner  of  Public  Works  and  City 
Comptroller  on  Regulation  of  Rates  under  Telephone  Ordinance  of 
Nov.  6,  1907,  by  D.  C.  and  William  B.  Jackson,  Engineers,  and 
Arthur  Young  &  Company,  Certified  Public  Accountants,  submitted 
Dec.  30,  1908;  City  Club  Bulletin,  Vol.  1,  nos.  17,  21;  Ordinance 
granting  a  franchise  to  the  People’s  Mutual  Telegraph  Company, 
Journal  of  Proceedings  of  City  Council,  Mar.  22,  1909. 

CINCINNATI:  Henderson’s  Compilation  of  Ordinances,  March, 
1905,  to  October,  1906,  and  October,  1906,  to  April,  1908 ;  Or¬ 
dinance  to  regulate  the  price  which  the  Cincinnati  Gas  Light  and 
Coke  Company  may  charge  for  Gas,  passed  July  31,  1899. 

CLEVELAND:  Special  Ordinances  of  the  City  of  Cleveland, 
Jan.  1,  1907 ;  Report  of  the  Special  Committee  on  Natural  Gas 
Ordinances,  adopted  by  the  Cleveland  Chamber  of  Commerce,  March 
19,  1907. 

COLUMBUS,  O.:  Franchise  Ordinances,  of  East  Columbus  Heat¬ 
ing  and  Lighting  Company,  July  14,  1902;  of  Indianola  Heating 
and  Lighting  Company,  April  7  and  Aug.  14,  1903;  of  Indianola 
Land  and  Power  Company,  April  8,  1901 ;  of  Columbus  Citizens’ 
Telephone  Company,  June  12,  1899;  of  Columbus  Edison  Electric 
Light  Company,  March  28,  1887 ;  of  Columbus  Electric  Light  and 
Power  Company,  May  27,  1895;  of  Columbus  Gas  Light  and  Coke 
Company,  June  27,  1892;  of  the  Federal  Gas  and  Fuel  Company,  May 
27,  1899,  Aug.  1,  1899,  and  April  4,  1900. 

DALLAS:  Franchise  Ordinances,  compiled  by  Charles  T.  Morriss, 
1908. 


6G6 


MUNICIPAL  FRANCHISES. 


DENVER:  Franchises  and  Special  Privileges,  compiled  by  Charles 
W.  Varnum  and  J.  Frank  Adams,  1907 ;  “  The  Economic  Struggle 
in  Colorado,”  by  J.  Warner  Mills,  published  in  The  Arena ,  Sept. 
Oct.,  Nov.,  1905;  Report  of  the  Board  of  Appraisers  and  Arbitra¬ 
tors  to  Mayor  and  City  Council  and  the  Denver  Union  Water  Com¬ 
pany,  March  20,  1909. 

DES  MOINES:  Ordinances  Nos.  724,  751. 

DETROIT:  Compiled  Ordinances,  1904;  Special  Message  of  the 
Mayor,  October  22,  1907,  transmitting  to  the  Common  Council  report 
of  H.  H.  Crowell  on  electric  light  supply. 

DULUTH:  “Franchises,”  being  pages  249  to  420  of  the  City 
Ordinances  published  about  1905. 

ERIE,  PA.:  Digest  of  Laws  and  Ordinances  in  force  April  2, 

1906,  with  notes  and  decisions. 

GENERAL:  “Some  Comments  on  the  1907  Annual  Report  of 
the  American  Telephone  and  Telegraph  Company,”  by  Gansey  R. 
Johnston,  published  by  International  Independent  Telephone  Asso¬ 
ciation;  Municipal  Engineering  and  Sanitation,  by  M.  N.  Baker; 
“  Pipe  Line  Refrigeration,”  by  Jos.  H.  Hart,  in  Engineering  Mag¬ 
azine,  for  June,  1908:  “Pipe  Line  Refrigeration,”  by  J.  E.  Starr,  ad¬ 
dress  delivered  Dec.  4,  1905,  before  American  Society  of  Refrigera¬ 
ting  Engineers  at  New  York  City;  Moody’s  Manual,  1908  edition; 
Engineering  News  for  Jan.  9  and  May  19,  1892;  “Municipal  and 
Private  Operation  of  Public  Utilities,”  Report  of  National  Civic 
Federation  Commission  on  Public  Ownership  and  Operation,  1907 ; 
“  A  Larger  View,”  by  A.  C.  Lindemuth,  published  by  International 
Independent  Telephone  Association;  American  Telephone  and 
Telegraph  Company,  Annual  Reports  of  directors  to  stockholders, 

1907,  1908;  “The  Question  of  Franchises”  by  George  C.  Sikes,  re¬ 
printed  from  the  Atlantic  Monthly  for  March,  1903;  Underground 
Piping  for  Steam  Distribution,  Bulletin  No.  105,  The  American 
District  Steam  Company ;  Municipal  Year  Book,  1 902,  edited  by 
M.  N.  Baker,  published  by  Engineering  News  Publishing  Company: 
Prices  charged  for  Gas  in  Various  Cities  of  the  United  States  from 
1885  to  1907,  inclusive,  compiled  by  the  Milwaukee  Gas  Light 
Company. 

GRAND  RAPIDS,  MICH.:  Compiled  Ordinances  of  the  City  of 
Grand  Rapids,  compiled  by  Colin  P.  Campbell,  1907  ;  Franchise  of 
the  Grand  Rapids-Muskegon  Power  Company,  passed  July  29,  1907. 

HARRISBURG,  PA.:  Digest  of  the  Laws  and  Ordinances  in 
force  Aug.  1,  1906. 

INDIANAPOLIS:  General  Ordinances  with  Acts  of  the  Indiana 
General  Assembly  relating  to  the  City,  collated  by  Edgar  A.  Brown 
and  William  W.  Thornton,  1904;  Ordinance  Ratifying  Contract  of 
Nov.  4,  1908,  between  the  Indianapolis  Water  Company  and  the 
City  of  Indianapolis;  Citizens’  Gas  Company  of  Indianapolis — 
Franchise,  Articles  of  Incorporation  and  By-Laws,  Jan.  14,  1908; 
Articles  of  Incorporation  and  By-Laws  of  the  Consumers’  Gas 
Trust  Company  of  Indianapolis;  “A  Model  Gas  Franchise  for  In¬ 
dianapolis,”  article  published  in  the  Municipal  Journal  and  En¬ 
gineer  for  Sept.,  1905. 

JERSEY  CITY:  Revised  Ordinances  as  amended  to  July  1,  1898, 
compiled  by  Howard  C.  Griffiths. 

JOHNSTOWN,  PA.:  “Some  Results  of  Steam  Heating  from  a 


LIST  OF  AUTHORITIES.  667 

Central  Station/’  by  James  A.  White  in  Central  Station,  for  Mav, 
1908. 

KANSAS  CITY,  MO.:  Franchise  Ordinances  for  Public  Utilities, 
1908. 

KALAMAZOO,  MICH.:  Ordinance  No.  236  granting  a  franchise 
to  Frank  W.  Armstrong  and  Associates,  for  the  construction  of  a 
Central  Power  and  Steam  Heating  Plant. 

LA  CROSSE,  WISC.:  Ordinances,  edited  by  Lemuel  W.  Gosnell, 
1903. 

LANCASTER,  PA.:  Digest  of  the  Laws  and  Ordinances  in  force 
April  1,  1906. 

LOCKPORT,  N.  Y.:  Franchise  of  Economy  Light,  Fuel  and 
Power  Company  for  lighting,  heating,  power  and  refrigerating 
plants. 

LONG  BRANCH,  N.  J. :  Franchise  of  Long  Branch  Sewerage 
Company,  April  9,  1906. 

LOS  ANGELES:  A  Contract  for  the  Leasing  of  the  Los  Angeles 
City  Water  Works,  July  20,  1868;  “The  Los  Angeles  Aqueduct”,  by 
Burt  A.  Heinly,  published  in  The  Earth,  Sept.,  1908;  Municipal 
Affairs,  official  journal  of  the  Municipal  League  of  Los  Angeles, 
April,  1908;  Reports  of  the  Board  of  Water  Commissioners  of  Los 
Angeles,  1902  to  1908;  Engineering  Record,  of  June  9,  1900; 
Engineering  News,  of  May  4,  1899. 

MASSACHUSETTS:  House  Bill  No.  1265,  session  of  1904,  en¬ 
titled  “  An  Act  Relative  to  the  Granting  of  Privileges  by  Cities  and 
Towns  to  Telegraph  and  Telephone  Companies,”  introduced  by  Mr. 
Garst,  of  Worcester;  Letter  on  Franchise  grants  from  F.  E.  Barker, 
Chairman  of  the  Massachusetts  Board  of  Gas  and  Electric  Light 
Commissioners,  to  M.  R.  Maltbie  of  the  Public  Service  Commission 
for  the  First  District  of  New  York,  June  2,  1908;  General  Laws  of 
Massachusetts  relating  to  the  manufacture  and  sale  of  gas  and 
electricity,  compiled  by  the  Board  of  Gas  and  Electric  Light  Com¬ 
missioners,  1906;  Massachusetts  Highway  Commission,  14th  and 
15th  Annual  Reports,  1907,  1908;  Massachusetts  Highway  Commis¬ 
sion — Laws  relating  to  the  work  of  the  Commission,  Nov.  1906; 
Board  of  Gas  and  Electric  Light  Commissioners — 22nd,  23rd,  and 
24th  Annual  Reports,  1906,  1907,  1908;  Report  of  the  Special  Com¬ 
mittee  on  the  “  Relations  between  Cities  and  Towns  and  Street 
Railways,”  1898;  Board  of  Railroad  Commissioners,  38th  Annual 
Report,  1906. 

MECOSTA  COUNTY,  MICH.:  Water  Power  Franchise  of  the 
Grand  Rapids-Muskegon  Power  Company  granted  to  David  D. 
Erwin,  June  22,  1904;  Report  of  Special  Committee  of  the  Board 
of  Supervisors  on  Water  Power  Conditions  in  Mecosta  County, 
April,  1909. 

MILWAUKEE:  Ordinances  granting  Franchises  for  Quasi-Public 
Purposes  to  June  8,  1896,  compiled  by  Charles  A.  Hamilton;  Gen¬ 
eral  Ordinances  to  Sept.  1,  1905,  with  amendments  thereto  and  an 
appendix,  compiled  by  Carl  Runge,  1906. 

MINNEAPOLIS:  Charter  and  Ordinances,  June  1,  1905;  Pro¬ 
posed  Ordinance  granting  a  Franchise  to  the  Minneapolis  General 
Electric  Company  recommended  to  the  City  Council  for  passage 
April  1,  1908,  by  the  Special  Committee  appointed  Nov.  8,  1907 ; 
Report  on  rates  and  methods  of  charge  for  electric  light  and  power 


668 


MUNICIPAL  FRANCHISES. 


as  applying  to  the  Minneapolis  General  Electric  Company,  sub¬ 
mitted  by  Charles  L.  Pillsbury,  Dec.  16,  1907 ;  Inventory  and  valua¬ 
tion  of  the  property  of  the  Minneapolis  General  Electric  Company, 
submitted  by  D.  C.  and  William  B.  Jackson,  Engineers,  Dec.  14, 
1907 ;  Message  of  Mayor  J.  C.  Haynes  vetoing  the  Minneapolis 
General  Electric  Company  Franchise,  June  19,  1908,  published  in 
the  Minneapolis  Daily  Eeics  of  June  20,  1908;  Letters  from  Mr. 
Stiles  P.  Jones,  Secretarv  of  the  Voters’  League  of  Minneapolis, 
1906  to  1909. 

NASHVILLE:  Laws  of  Nashville,  compiled  by  Hill  McAlister  and 
Edward  J.  Smith,  1908. 

NEWARK,  N.  J.:  Compilation  of  the  Laws  and  Charters  of  the 
Corporations  using  the  Public  Streets,  and  Ordinances,  Motions  and 
Resolutions  regulating  them,  compiled  by  Malcolm  MacLear,  1904. 

NEW  BRITAIN,  Conn. :  Municipal  Record,  1907 ;  Charter,  pub¬ 
lished  1906. 

NEW  JERSEY:  Report  of  Commissioners  to  investigate  the 
whole  subject  of  franchises  granted  by  municipalities  to  public 
utility  corporations,  1906. 

NEW  ORLEANS:  Order  No.  868  of  the  Railroad  Commission 
of  Louisiana,  relative  to  telephone  rates  and  exchange  service.  City 
of  New  Orleans,  issued  April  29,  1908;  Letter  from  W.  M.  Barrow, 
Secretary  of  the  Railroad  Commission  of  Louisiana  relative  to 
telephone  matters,  March  12,  1909 ;  Charter  and  By-Laws  of  the 
New  Orleans  Water  Works  Company;  Ordinance  No.  909,  Council 
Series,  Sept.  26,  1884,  relative  to  the  Franchise  of  the  New  Orleans 
Water  Works  Company;  “Telephone  Conditions  in  New  Orleans, 
La.,”  a  report  presented  by  a  Special  Committee  of  the  New 
Orleans  Board  of  Trade,  Ltd.,  approved  April  8,  1908 ;  Proceedings 
of  the  13th  Annual  Convention  of  the  American  Society  of  Muni¬ 
cipal  Improvements,  1906 ;  The  Annals,  for  November,  1907 ;  Journal 
of  Association  of  Engineering  Societies,  for  Nov.,  1901,  article  by 
W.  T.  Crotts. 

NEWPORT,  KY.:  Special  Ordinances,  being  pages  355  to  447  of 
the  Book  of  Ordinances. 

NEW  YORK  CITY :  Public  Service  Commission  for  the  First 
District,  Report  for  the  year  ending  Dec.  31,  1907,  Vol.  2 ;  Public 
Service  Commission  Report  on  the  “  Indeterminate  Franchise  for 
Public  Utilities”  submitted  Dec.  29,  1908,  by  Commissioner  Milo 
R.  Maltbie:  “Inquiry  into  Telephone  Service  and  Rates  in  New 
York  City”,  by  the  Merchants’  Association  of  New  York,  June, 
1905;  “Telephone  Competition  in  various  American  Cities,”  con¬ 
taining  a  supplemental  telephone  report  by  a  special  committee  of 
the  Merchants’  Association,  published  by  the  New  York  Telephone 
Company,  Feb.,  1906;  “Progress  in  Methods  of  granting  Franchises 
in  New  York  City,”  an  address  by  Harry  P.  Nichols,  before  the 
City  Club  of  Philadelphia,  March  4,  1907 ;  Public  Service  Commis¬ 
sion,  report  in  the  matter  of  uniform  systems  of  accounts  for 
Public  Service  Corporations,  adopted  Dec.  8,  1908;  Public  Service 
Commission,  report  in  the  matter  of  Electric  Lighting  contracts, 
rates,  schedules,  etc.,  adopted  Dec.  18,  1908 ;  Proceedings  of  the 
Board  of  Aldermen,  Vol.  164,  1881 ;  Reports  of  the  City  Bureau  of 
Franchises — on  application  of  the  Atlantic  Telephone  Company, 
Oct.  12,  1905,  April  24,  1906,  Nov.  21,  1906,  and  June  17,  1907;  on 


LIST  OF  AUTHORITIES. 


669 


application  of  the  New  York  Cahill  Telharmonic  Company,  May 
31,  1907;  on  application  of  Seaboard  Refrigeration  Company,  Feb. 
26,  1906;  on  application  of  Manhattan  Refrigerating  Company, 
April  16,  1906;  on  application  of  Kings  County  Refrigerating  Com¬ 
pany,  March  21,  1906;  Minutes  of  the  Electrical  Subway  Commis¬ 
sioners  and  Board  of  Electrical  Control,  1886  to  1897 ;  Resolution 
of  Board  of  Estimate  and  Apportionment  granting  franchise  to 
United  Electric  Service  Company,  in  City  Record,  May  14,  1909; 
Compilation  of  Laws  and  Ordinances  relating  to  railroad  and  other 
corporations  in  the  City  of  New  York,  1860  to  1887 ;  Franchises  and 
Contracts  of  gas,  electrical  and  conduit  companies,  on  file  with 
Public  Service  Commission;  Gas  and  Electric  Light  Investigation 
by  Stevens  Joint  Committee  of  Legislature,  Charles  E.  Hughes, 
Counsel,  1905. 

PHILADELPHIA:  “Philadelphia’s  Relation  to  Rapid  Transit 
Company,”  by  Edwin  O.  Lewis,  published  in  The  Annals,  1908;  “A 
Review  of  the  Gas  Situation  in  Philadelphia,”  issued  by  the  Com¬ 
mittee  of  Seventy,  June,  1905. 

PORTLAND,  ORE.:  General  Ordinances  in  force  Jan.  2,  1905, 
compiled  by  Thomas  C.  Devlin ;  Automatic  Telephone  Franchise 
granted  to  Charles  E.  Sumner  by  popular  vote,  June  5,  1905. 

RICHMOND,  VA.:  Franchises  granted  by  the  City  Council,  to 
Dec.  31,  1899. 

ROCHESTER:  Municipal  Code,  Vol.  2,  containing  a  Codifica¬ 
tion  of  all  local  Ordinances,  Rules  and  Regulations  in  force  Jan.  1, 
1907,  compiled  by  Edward  R.  Foreman;  Sixth  Annual  Report  of  the 
Department  of  Public  Works,  for  the  year  1905. 

ROCKFORD,  ILL.:  Revised  Ordinances,  1903;  Ordinance  passed 
and  adopted  in  1908  amending  the  Franchises  of  the  Rockford  Elec¬ 
tric  Company. 

SAGINAW:  Compiled  Ordinances,  1898;  Ordinance  granting  a 
franchise  to  Saginaw  City  Gas  Co.,  adopted  Dec.  21,  1908. 

ST.  PAUL:  Compiled  Ordinances,  corrected  and  revised  to  Jan.  1, 
1906,  compiled  by  Hiram  David  Frankel;  Special  report  of  R.  S. 
Fuertado  on  a  reasonable  price  for  the  manufacture  and  distribu¬ 
tion  of  gas  in  the  City  of  St.  Paul,  submitted  to  the  Corporation 
Attorney,  October  1,  1907 ;  Ordinance  granting  an  electric  light 
franchise  to  the  Northern  Heating  and  Electric  Company,  Dec.  26, 
1906,  as  published  in  the  St.  Paul  Daily  Neivs. 

SALT  LAKE  CITY:  Franchises  of  various  Public  Utility  Corpo¬ 
rations,  being  pages  342  to  567  of  the  Book  of  Ordinances,  pub¬ 
lished  about  1904;  Ordinance  ratifying  and  confirming  the  transfer 
of  franchises  to  the  Utah  Light  and  Railway  Company,  etc.,  ap¬ 
proved  Aug.  4,  1905;  Ordinance  amending  the  Utah  Light  and  Rail¬ 
way  Company’s  Franchise,  approved  Dec.  3,  1907 ;  Ordinance  grant¬ 
ing  J.  S.  Manley  and  L.  H.  Curtis  an  electric  light  franchise,  ap¬ 
proved  May  17,  1906;  Ordinance  granting  to  George  A.  Snow  and 
William  Darst  a  gas  franchise,  approved  Sept.  7,  1905;  Ordinance 
amending  the  gas  franchise  of  Snow  and  Darst,  approved  Feb.  21. 
1906;  Ordinance  granting  a  franchise  to  the  Citizens’  Heating  and 
Power  Company,  approved  Sept.  21,  1905. 

SAN  FRANCISCO:  Reports  on  the  Water  Supplies  of  San  Fran¬ 
cisco,  Cal.,  1900  to  1908,  inclusive,  published  by  authority  of  the 
Board  of  Supervisors;  “Shall  San  Francisco  Municipalize  its  Water 


670 


MUNICIPAL  FRANCHISES. 


Supply?”  by  A.  S.  Baldwin,  in  Municipal  Affairs,  for  June,  1900; 
City  Charter  in  effect  Jan.  8,  1900,  with  Amendments  of  1903  and 
1907. 

SEATTLE:  Charter  and  Ordinances,  Revised  Edition,  1908. 

SOMERVILLE,  MASS.:  Municipal  Manual  published  in  the  year 
1901 ;  Standard  forms  used  by  the  Board  of  Aldermen  for  granting 
locations  for  telephone,  electric  light  and  gas  mains. 

SOUTH  BEND,  IND.:  Laws  and  Ordinances,  1905. 

SPRINGFIELD,  ILL.:  Franchise  Ordinances,  compiled  by  Roy 
M.  Seeley  and  John  M.  Pfeifer,  1907. 

SPRINGFIELD,  MASS.:  Standard  form  of  permit  granted  by  the 
Board  of  Aldermen  for  underground  work;  Ordinance  relating  to 
telephone  lines,  conduits  and  distributing  poles,  being  Chapter  46  of 
the  Revised  Ordinances. 

SYRACUSE:  Abstract  of  gas,  electric  light,  telephone,  conduit 
and  other  franchise  ordinances  furnished  to  the  author  by  Dr. 
Charles  W.  Tooke. 

TOLEDO:  Special  Ordinances — Franchises  and  Grants  of  Special 
Privileges,  1908;  Letter  from  Charles  S.  Northrup,  City  Solicitor, 
to  Brand  Whitlock,  Mayor,  March  6,  1909,  relative  to  the  franchise 
of  the  Home  Telephone  Company. 

TOPEKA,  KS. :  Compiled  and  Revised  General  Ordinances  and 
Compilation  of  certain  Laws  of  Kansas  directly  affecting  cities  of 
the  first  class,  1905. 

TRENTON :  Charter  and  Ordinances ;  also  certain  Acts  of  the 
Legislature  relating  to  Municipal  Departments,  1903. 

TROY,  N.  Y.:  Municipal  Ordinances,  1905,  compiled  by  John  T. 
Norton. 

UNITED  STATES:  Special  Reports,  Bureau  of  the  Census — 
“Street  and  Electric  Railways;  1902,”  “Statistics  of  Cities  having 
a  population  of  over  30,000,”  1902,  1903,  1905,  1906;  “Central  Elec¬ 
tric  Light  and  Power  Stations,  1902”;  Bureau  of  the  Census,  Bul¬ 
letin  17,  “Telephones  and  Telegraphs,  1902”;  Special  Reports  of  the 
Census  Office,  “Mines  and  Quarries,  1902  ”;  Report  of  the  Twelfth 
Census,  Vol.  X;  Bureau  of  the  Census,  Preliminary  Report  on 
Telephones,  1907,  released  Jan.  29,  1909;  on  Street  and  Electric 
Railways,  1907,  released  Jan.  18,  1909;  on  Telegraphs,  1907,  re¬ 
leased  Feb.  13,  1909:  on  Central  Electric  Light  and  Power  Stations, 
1907,  released  Jan.  12,  1909;  Geological  Survey  Report  of  the  min¬ 
eral  resources  of  the  United  States  for  1907 ;  “  Pneumatic  Tube 
Service  ” — report  of  the  Post  Master  General  to  Congress,  relative 
to  the  investigation  of  pneumatic  tube  systems  for  the  transmission 
of  mfjil,  Jan.  4,  1901;  “Investigation  as  to  Pneumatic  Tube  Serv¬ 
ice  for  the  Mails,”  a  report  transmitted  by  the  Post  Master  General 
to  the  Speaker  of  the  House  of  Representatives,  Dec.  15,  1908; 
Report  of  the  Second  Assistant  Post  Master  General  to  the  Post 
Master  General  for  the  year  ended  June  30,  1908.  (Note:  Bulletin 
102  of  the  Bureau  of  the  Census,  “Telegraph  Systems:  1907  ”,  was 
received  too  late  for  use  in  the  preparation  of  this  volume.) 

WASHINGTON,  D.  C. :  “Telephone  Charges  in  the  District  of 
Columbia  ”,  being  testimony  taken  before  the  Committee  to  in¬ 
vestigate  gas  and  telephone  companies,  submitted  to  the  House  of 
Representatives,  March  9,  1898,  printed  as  No.  1659  House  Reports, 
Vol.  7,  55th  Congress,  2nd  Session;  Report  of  the  Electrical  Com- 


LIST  OF  AUTHORITIES. 


671 


mission  appointed  to  consider  the  location,  arrangement  and  opera¬ 
tion  of  electric  wires  in  the  District  of  Columbia;  Report  of  the 
Electrical  Commission  appointed  to  consider  the  location,  arrange¬ 
ment  and  operation  of  electric  wires  in  the  District  of  Columbia, 
presented  to  President  Harrison,  December  23,  1891,  printed  as 
Executive  Document  No.  15,  House  of  Representatives,  52nd  Congress, 
1st  Session;  Report  of  the  Commissioners  of  the  District  of  Columbia 
for  the  years  ending  June  30,  1906,  and  June  30,  1907,  Volumes  1 
and  2  of  each  year;  Laws  relating  to  gas,  electric  light,  telegraph 
and  telephone  companies  and  the  electrical  equipment  of  street  rail¬ 
way  companies  in  the  District  of  Columbia,  compiled  by  Walter  C. 
Allen,  1908. 

WICHITA,  KS.:  Book  of  Ordinances,  compiled  by  A.  Z.  Buzzi, 
1908. 

WISCONSIN:  Opinions  and  Decisions  of  the  Railroad  Commis¬ 
sion  of  Wisconsin,  Vol.  2,  Sept.  14,  1907  to  Oct.  12,  1908. 

WORCESTER:  Letter  from  F.  E.  Barker,  Chairman  of  Mass¬ 
achusetts  Board  of  Gas  and  Electric  Light  Commissioners,  June  9, 
1908. 


. 


INDEX  OF  VOLUME  I 


Abutting  property :  rights  of  own¬ 
ers,  Massachusetts,  253.  See 
Property  owners’  consents. 

Acceptance  of  franchises ;  required, 
14 ;  required.  Salt  Lake  City 
electric,  161  ;  referendum,  Nash¬ 
ville  electric,  168;  Grand  Rapids 
electric  power,  175 ;  Atlanta 
electric,  177;  six  months,  Min¬ 
neapolis  electric,  197 ;  should  in¬ 
clude  relinquishment  of  prior 
franchises,  216 ;  waiver  of  prior 
rights,  Chicago  telephone,  281 ; 
messenger  and  signal,  353,  355 ; 
within  thirty  days,  Indianapolis 
water,  420 ;  Lockport  central 
heating,  495  ;  sewerage,  457,  460 ; 
within  ninety  days,  St'.  Louis 
pneumatic  tube,  523 ;  within  fif¬ 
teen  days,  Dallas  fuel  oil,  532 ; 
New  York  City  artificial  gas, 
554  ;  written,  Kansas  City,  Mo., 
natural  gas,  612 ;  in  detail,  To¬ 
ledo  gas,  647  ;  Salt  Lake  City  gas, 
includes  revocation  of  former 
grants,  652 ;  time  limit,  653 ;  re¬ 
linquishment  of  former  grants, 
Detroit  gas,  658. 

Accessories :  profits  from  sale  of, 
67. 

Accidents :  street  railway  statistics 
of,  89  ;  court  for  investigation  of, 
112;  precautions  against,  Nash¬ 
ville  electric  franchise,  165.  See 
Damages. 

Accounts  :  uniform  system  for  public 
utility  corporations,  211  ;  Massa¬ 
chusetts  telephone,  253,  258 ;  Chi¬ 
cago  telephone,  system  of.  pre¬ 
scribed,  274 ;  examination  of,  by 
appraisers,  283  ;  inadequate,  285  ; 


New  Orleans  telephone,  287 ;  Chi¬ 
cago  telegraph  company,  345 ; 
form  of,  prescribed,  New  York 
conduit  company,  375,  381  ; 

New  Haven  Water  Company,  open 
to  stockholders,  409 ;  may  be  in¬ 
vestigated  by  council,  Indianapo¬ 
lis,  417 ;  Atlantic  City  Sewer¬ 
age  Company,  462  ;  Detroit  cen¬ 
tral  heating,  471 ;  open  to  city 
comptroller,  South  Bend,  Ind., 
481 ;  open  to  city  authorities, 
Kansas  City,  Mo.,  central  heating, 
482 ;  New  York  refrigeration, 
open  to  Board  of  Estimate,  501  ; 
wt.  Louis  pneumatic  tube,  open  to 
city  comptroller,  520 ;  Chicago 
pneumatic  tube,  open  to  apprais¬ 
ers,  522 ;  Nashville  gas,  open  to 
city’s  experts,  587 ;  natural  gas, 
open  to  inspection  of  city  auditor, 
Cleveland,  600 ;  Kansas  City,  Mo., 
gas,  open  to  city  authorities,  615  ; 
Indianapolis  natural  gas,  open  to 
board  of  public  works,  632 ;  In¬ 
dianapolis  gas,  open  to  controller, 
642  ;  Detroit  gas,  open  to  control¬ 
ler,  657.  See  Publicity  of  ac¬ 
counts,  Reports. 

Acquiescence :  franchises  acquired  by, 
15 ;  telephone  franchises  acquired 
by,  Washington,  D.  C.,  289 ;  tele¬ 
graph  franchise  acquired  by,  New¬ 
port,  Ky.,  341 ;  doctrine  in  New 
York  City,  559. 

Administrative  departments :  fran¬ 
chises  granted  by,  13. 

Advertisement :  Indianapolis  tele¬ 

graph  franchise,  306  ;  Minneapolis 
central  heating  franchise,  487  ;  gas 
charter  granted  after,  Springfield, 


674 


INDEX  OF  VOLUME  I. 


Ill.,  588  ;  for  bidders  for  gas  fran¬ 
chise,  Newport,  Ivy.,  592. 

Advertising :  in  Boston  elevated 

cars  and  stations,  68  ;  tax  on,  69. 

Allegheny :  municipal  electric  light¬ 
ing,  141. 

Amendment :  right  of,  reserved,  Du¬ 
luth  electric  franchise,  161  ;  Grand 
Rapids,  173  ;  Des  Moines  gas  fran¬ 
chise,  581 ;  permitting  increase  in 
gas  rate,  Wheeling,  622 ;  increase 
In  gas  rates.  Salt  Lake  City,  654  ; 
reducing  gas  rates  to'  minimum, 
Detroit,  658. 

American  Pneumatic  Service  Com¬ 
pany  :  claims  to  own  all  im¬ 
portant  pneumatic  tube  patents, 
511-12. 

American  Telephone  and  Telegraph 
Company  :  patents  of,  56  ;  subsidi¬ 
aries  of,  221-6,  260 ;  report  for 
1907,  237 ;  monopoly  without  con¬ 
ditions,  258-62. 

Ammonia  system  of  refrigeration : 
cities  having,  498. 

Amusement  parks.  See  Auxiliary 
enterprises. 

Ann  Arbor,  Mich. :  telephones,  318- 
20;  water  franchise  404-9. 

Apparatus.  See  Patents,  Fixtures, 
Equipment. 

Appliances.  See  Patents,  Fixtures, 
Equipment. 

Appraisal :  method  of,  62 ;  expense 
of.  Salt  Lake  City,  158;  of  value 
of  Minneapolis  electrical  plant, 
195 ;  of  damages  to  abutting 
property,  Masachusetts,  253 ;  Chi¬ 
cago  telephone,  purchase  price, 
282 ;  to  determine  investment, 
284  ;  to  determine  value  of  Indi¬ 
anapolis  telephone  plant,  305 ;  by 
judge  of  circuit  court,  Minneapo¬ 
lis,  390 ;  of  Ann  Arbor  water 
works  property,  407 ;  of  New 
Haven  water  company’s  property, 
412;  of  value  of  water  plant  in 
Denver,  440—1,  445  ;  of  Chicago 
pneumatic  tube  system,  522 ;  of 
value  of  Des  Moines  gas  plant, 
581  ;  of  Nashville  gas,  franchise 
not  included,  5S7 ;  of  value  of 
Springfield  gas  system,  590 ;  by 


judge  of  circuit  court,  Kansas 
City,  Mo.,  611  ;  of  Topeka,  Ks., 
artificial  gas  company’s  property, 
620.  See  Arbitration,  Purchase 
price. 

Arbitration :  method  of  choosing 
board  of,  62 ;  of  complaints,  99- 
100 ;  court  of,  for  settlement  of 
damage  claims,  112  ;  in  Salt  Lake 
City  electric  franchise,  158 ;  in 
Duluth  electric  franchise,  162, 
for  fixing  rates,  Cedar  Rapids,  la., 
electric,  175 ;  of  purchase  price, 
Columbus  electric,  179,  186;  of 
terms  for  joint  use,  Denver  elec¬ 
tric,  207  ;  of  terms  of  connecting 
service  in  adjoining  towns,  Massa¬ 
chusetts,  258 ;  of  compensation 
for  renewal,  New  York  City  tele¬ 
phone,  266 ;  of  terms  of  long 
distance  connections,  Indianapolis, 
307  ;  of  purchase  price,  Minneapo¬ 
lis  telephone  property,  316;  of 
purchase  price,  Portland  messen¬ 
ger  franchise,  359 ;  of  purchase 
price  of  conduits,  Nashville,  371  ; 
of  terms  for  joint  use  of  conduit 
space,  Buffalo,  388 ;  by  circuit 
judge,  Kansas  City,  Mo.,  conduit, 
390  ;  of  water  rates  at  fixed  peri¬ 
ods,  415 ;  of  Indianapolis  water 
rates,  419,  422  ;  of  purchase  price, 
Denver  water  works,  443  ;  of  value 
of  Indianapolis  central  heating, 
487  ;  of  purchase  price  of  Duluth 
central  heating  system,  488 ;  of 
value  of  Baltimore  refrigeration 
system,  504 ;  of  rates  by  circuit 
court,  Kansas  City,  505 ;  of  Sagi¬ 
naw  gas  rates,  585 ;  of  purchase 
price  of  Nashville  gas  system,  587 ; 
of  purchase  price  of  Cleveland 
natural  gas  system,  600 ;  Colum¬ 
bus,  O.,  purchase  price  of  natural 
gas  system,  608 ;  of  difference  of 
opinion  as  to  ability  of  company 
to  furnish  natural  gas,  609 ;  of 
rates,  Kansas  City,  Mo.,  gas  fran¬ 
chise,  615;  of  value  of  Wheeling, 
W.  Va.,  natural  gas  system,  622 ; 
of  Indianapolis  natural  gas  rate, 
632 ;  of  Salt  Lake  City  gas  rate, 
654 ;  Detroit,  gas  rates,  655 ;  of 


INDEX  OF  VOLUME  I. 


purchase  price  for  system,  657. 
See  Appraisal. 

Argand  burner :  with  natural  gas, 
538. 

Assignment  of  franchise :  should  be 
recorded  with  city,  94  ;  must  first 
offer  system  to  city,  160 ;  valid 
when  copy  is  filed,  183 ;  Minne¬ 
apolis  electric,  196 ;  not'  a  release 
from  its  provisions,  267 ;  Ann 
Arbor  telephone,  320 ;  by  vote  of 
council,  352 ;  by  consent  of  hoard 
of  estimates,  366 ;  Nashville  con¬ 
duit,  374  ;  city  must  first  he  given 
chance  to  purchase  plant,  420 ; 
Austin,  Tex.,  sewer,  459 ;  record 
must  he  filed,  Seattle  central 
heating,  479 ;  by  consent  of  city, 
Kansas  City  central  heating, 
483 ;  by  permit  of  city,  New¬ 
ark  central  heating,  494  ;  consent 
of  city  necessary  after  ninety 
days,  Kansas  City  refrigeration, 
505 ;  consent  of  city  necessary 
after  six  months,  Wichita,  Ivs.,  re¬ 
frigeration,  506 ;  within  sixty 
days  after  acceptance,  Dallas  com¬ 
pressed  air,  525  ;  to  a  corporation, 
Richmond,  Va.,  compressed  air, 
526 ;  by  consent  of  council,  St. 
Paul  artificial  gas,  579 ;  to  com¬ 
petitors,  forbidden,  Kansas  City, 
612.  See  Consolidation,  Monop¬ 
oly. 

Atlanta :  electric  franchise,  176-7. 

Atlantic  City,  N.  J. :  private  sewer¬ 
age  system,  460-5. 

Austin,  Texas :  private  sewer  fran¬ 
chise,  457. 

Automatic  telephones :  used  by  In¬ 
dependents,  234,  266 ;  required, 

268,  309 ;  success  of,  274 ;  fran¬ 
chises  should  contain  provision 
for,  321. 

Auxiliary  enterprises :  profit's  from, 
65-6  ;  amusement  parks,  65,  77. 

Baldwin,  Simeon  E. :  chairman  of 
committee  to  determine  price  of 
New  Haven  water  supply  prop¬ 
erty,  412-13. 

Baltimore:  conduit  system,  382; 
lack  of  sanitary  sewers,  452 ;  re¬ 


675 

frigeration  franchise,  502-4 ;  gas 
and  electricity,  623-9. 

Bell  Telephone  Company.  ^ee 
American  Telephone  and  Tele¬ 
graph  Company. 

Bills :  for  sewerage,  Atlantic  City, 
N.  J.,  463 ;  Detroit  gas,  must 

specify,  656 ;  arrears  for  public 
lighting  in  Chicago,  660.  See 
Discounts  and  rebates,  Rebates, 
Penalty. 

Birmingham,  Ala. :  water  franchise, 
447. 

Boise  :  hot'  and  cold  water  from  arte¬ 
sian  wells,  450. 

Bond.  See  Indemnity,  Security  fund, 
Penalty  fund. 

Bonds :  expiration  of,  with  fran¬ 
chise,  117 ;  inter-company  guar¬ 
antees  of,  119  ;  issue  of,  limited, 
172,  216,  316,  410-2;  of  Balti¬ 
more  for  conduit  construction, 
383 ;  of  New  Britain,  Conn.,  for 
conduit  construction,  386 ;  of  New 
Haven  water  company,  411 ;  of 
Los  Angeles  for  municipal  water 
works,  434-5 ;  of  New  Orleans 
water  company,  437 ;  issues  of. 
not  to  exceed  cost  of  construction, 
Nashville  central  heating,  493. 
See  Capitalization. 

Boston  :  transit  consolidation,  126  ; 
refrigeration,  498 ;  pneumatic 
tubes,  518-20 ;  gas  franchises, 
560-6. 

Boston  Consolidated  Gas  Company : 
sliding  scale  device  of,  57-8,  560- 
6. 

Brandeis,  Louis  D.  :  quoted,  564. 

Bribery  of  public  officials,  105-9. 
See  Corruption 

Brooklyn  Rapid  Transit  Company : 
number  of  subsidiary  companies, 
29,  93,  126. 

Bryan,  Samuel  M.  :  on  telephones  in 
Washington,  D.  C.,  289,  301-3. 

Buffalo :  electric  franchises,  206-9 ; 
conduit’  franchise,  387. 

Butte  :  messenger  and  burglar  alarm 
franchise,  360 ;  water  franchises, 
445-6. 

By-products :  profits  from  sale  of, 
67-9  ;  of  manufacture  of  coal  gas, 


676 


INDEX  OF  VOLUME  I. 


535 ;  report  of,  Topeka,  Ks.,  arti¬ 
ficial  gas,  619  ;  daily  revenue  from 
sale  of,  by  Indianapolis  gas  com¬ 
pany,  646. 

California  :  sale  of  franchises  in, 
38 ;  regulation  of  rates  in,  42 ; 
general  act  providing  for  incor¬ 
poration  of  water  companies, 
423-5. 

Campaign  contributions :  by  tele¬ 
phone  company,  255.  See  Cor¬ 
ruption. 

Candle  power  :  of  gas,  536,  538,  553, 
554,  556,  570,  575,  577,  580,  587, 
592,  601,  609,  648,  651,  657, 

659. 

Capitalization :  of  electric  light 

companies,  136 ;  limitation  of, 
216 ;  of  telephone  and  telegraph 
companies,  219  ;  of  telephone  com¬ 
panies,  Massachusetts,  253 ;  con¬ 
trol  of,  by  board  of  estimate.  New 
York  City  telephone,  264 ;  of  At¬ 
lantic  Telephone  Company,  sub¬ 
ject  to  city’s  supervision,  272 ;  of 
Washington,  D.  C.,  telephone  com¬ 
pany,  292-3 ;  limited,  Indianapo¬ 
lis  telephone,  307-8 ;  of  telegraph 
industry,  324 ;  of  electrical  con¬ 
duit  company,  New  York  City, 
382 ;  of  New  Haven  water  com¬ 
pany,  409-11 ;  of  New  Orleans 
water  company,  437 ;  of  sewerage 
and  drainage  undertakings,  453-4  ; 
of  Salt  Lake  City  central  heat¬ 
ing  company,  478 ;  of  pneumatic 
tube  business,  \511-3 ;  gas  com¬ 
panies,  534 ;  Consolidated  Gas 
Company  of  New  York,  556 ;  in¬ 
cludes  franchise  values,  560 ;  of 
Baltimore  Consolidated  Gas  and 
Electric  Company,  626 ;  of  Indi¬ 
anapolis  gas  company,  640-2.  See 
Bonds,  Overcapitalization. 

Car  license  fees :  should  be  pro¬ 
vided  for  in  franchise,  48. 

Cedar  Rapids,  la. :  electric  light 
franchise,  175-6 ;  free  electric 
clock  furnished  city  under  tele¬ 
graph  franchise,  342. 

Central  heating  franchises,  Chapter 
XV,  466-97. 


Central  park :  franchise  for  light¬ 
ing  of,  551. 

Chicago:  increase  of  franchise 

values  in,  34  ;  indeterminate  fran¬ 
chise  in,  36 ;  division  of  profits 
with  city  in,  59  ;  useless  telephone 
calls,  87 ;  municipal  electric 
lighting,  141  ;  electric  franchises, 
143,  200-6 ;  telephone  situation, 
222-4,  228 ;  telephone  commission 
on  rates,  243-4 ;  telephone  ac¬ 
counts,  248 ;  telephone  franchise, 
273-85 ;  telegraph  franchise, 
344-8 ;  conduits,  387 ;  pneumatic 
t'ube  franchise,  520-5 ;  gas  fran¬ 
chise,  659-62. 

Cincinnati :  natural  gas  superseding 
artificial,  595-9. 

Cisterns :  water  for  domestic  use 
from,  New  Orleans,  439. 

City  Island.  See  New  York  City. 

Civic  Federation.  See  National 
Civic  Federation. 

Civil  Damages.  See  Damages. 

Cleveland :  property  owners’  con¬ 
sents,  75  ;  pipe  lines  for  local  dis¬ 
tribution  of  oil,  529  ;  franchise  for 
natural  gas,  541-2 ;  artificial  and 
natural  gas  in  competition,  599- 
605. 

Coal  gas :  and  by-products,  535 ; 
candle  power,  required,  586. 

Coke.  See  By-products. 

Collection  stations :  of  Cleveland 
natural  gas  company,  605. 

Columbus,  O. :  electric  franchise, 
177-9  ;  telephone  competition,  238  ; 
central  heating,  474-7 ;  natural 
gas  franchises,  605-9. 

Combination :  to  fix  rates,  310 ;  of 
telegraph  companies  forbidden, 
339 ;  Grana  Rapids  messenger 
and  signal,  351  ;  defined  and  for¬ 
bidden,  525 ;  precautions  against, 
Kansas  City,  Mo.,  gas  franchise, 
612,  617 ;  concerning  gas  rates, 
forbidden  in  Detroit,  658.  See 
Assignment  of  franchise,  Consoli¬ 
dation,  Monopoly. 

Commissions  :  Massachusetts  Gas  and 
Electric  Light,  inquiry  into  rates 
by,  83-5 ;  Chicago  telephone,  re¬ 
port,  87,  243-4 ;  Seattle  utility 


INDEX  OF  VOLUME  I. 


677 


commissioner,  100 ;  Wisconsin 
Railroad,  245-9,  Massachusetts 
state  highway,  252 ;  Louisiana 
Railroad,  285.  See  Public  Service 
Commission,  Public  Utilities  Com¬ 
mission. 

Common  use.  See  Joint  use  of  fix¬ 
tures. 

Compensation  for  franchises :  origin 
of  demand  for,  4  ;  free  service  to 
churches  on  Staten  Island,  19, 
210 ;  special  obligations,  49-52 ; 
percentage  of  net  earnings,  39,  59, 
171,  284,  376,  382,  492,  619,  625; 
portion  of  gross  receipts,  152,  168  ; 
170,  172,  176,  187,  197,  199,  201, 

204,  206,  257,  267,  275,  316,  362, 

365,  387,  390,  474,  478,  481,  482, 

486,  490,  494,  499,  500,  502,  506, 

520,  523,  524,  527,  557,  576,  587, 

590,  600,  615,  653 ;  service  at  a 
discount,  153,  157,  171,  275,  317, 
319,  320,  342,  363,  479,  4S5,  495, 
652 ;  free  electric  service,  154, 
156,  157,  159,  162,  167,  172,  178, 
210  ;  free  use  of  fixtures,  155,  156, 
160,  177,  189,  198,  256,  259,  269, 

275,  291,  304,  309,  316,  318,  320, 

334,  336,  339,  342,  344,  354,  371, 

523;  annual  fee,  159,  174,  188, 
304,  307,  309,  335,  346,  352,  357, 

362,  365,  457,  485,  499,  500,  503, 

527,  606 ;  various  provisions  for 
cash  payment,  184,  188,  267,  365, 
500  ;  charge  per  lineal  foot  of  ex¬ 
cavation,  210,  259,  346,  476,  489, 
491,  492,  500,  502,  532,  555;  free 
telephone  service,  245-8,  255,  263, 
268,  275,  308,  310,  317,  319,  320, 
365 ;  by  Atlantic  Telephone  Com¬ 
pany,  263,  267 ;  limited  number 
of  telephones  free,  314  ;  free  tele¬ 
graph  service,  328,  334,  339,  342  ; 
an  electric  clock,  to  be  furnisTied 
free  by  telegraph  company,  342 ; 
free  signal  and  messenger  service, 
353,  356,  357,  360,  361  ;  free  con¬ 
duit  space,  376,  387,  388,  389, 
391,  392 ;  free  water  from  hy 
drant's,  406  ;  free  water  for  public 
purposes,  418,  421,  433,  444 ; 

free  sewerage  for  public  buildings, 
456,  459,  461  ;  percentage  of  total 


investment,  Newark  central  heat¬ 
ing,  494 ;  charge  for  manholes, 
500 ;  free  refrigeration  for  public 
purposes,  501  ;  alternative  of  per¬ 
centage  of  gross  receipts  or  fee 
per  100  yds.,  New  York  City  pneu¬ 
matic  tube  company,  518 ;  per¬ 
centage  of  all  monies  received 
from  the  sale  of  natural  gas  at'  a 
price  exceeding  fifteen  cents  per 
1000  feet,  Columbus,  O.,  607  ;  free 
gas  light  for  public  buildings,  and 
street  lamps,  Kansas  City,  Mo., 
615,  616 ;  free  gas  light  for  one 
public  building,  Topeka,  Ks.,  618  ; 
free  gas  for  heating  public  build¬ 
ings,  622,  623;  Salt  Lake  City, 
tax  on  sales  of  gas,  652  ;  free 
heat  to  public  buildings,  654. 
See  Taxes. 

Competition :  franchises  absorbed  by 
a  single  company,  17-29 ;  substi¬ 
tute  for,  32 ;  versus  monopoly  in 
public  utility  enterprises,  123-4 ; 
monopoly  limited  by  indirect,  124- 
6;  in  the  electrical  industry,  139, 
140,  142,  143 ;  Salt  Lake  City 
electric,  154  ;  Denver  electric,  186  ; 
Buffalo  electric,  206—9 ;  versus 
monopoly  in  the  telephone  busi¬ 
ness,  226,  237-42,  265-6,  321  ; 

opposed  by  Merchants’  Associ¬ 
ation,  New  York  City,  261 ;  effect 
of,  upon  telephone  rates,  265-6 ; 
to  reduce  rates,  Indianapolis,  303, 
307,  308 ;  Toledo  telephone,  315 ; 
secured  through  the  Initiative, 
Portland,  Ore.,  308,  312 ;  Ann 

Arbor  telephone,  320 ;  telephone 
and  telegraph,  325 ;  effort  to 
maintain  telegraphic,  328,  330, 

338,  339,  340,  341  ;  in  furnishing 
water,  New  Haven,  410  ;  in  wafer 
business,  Denver,  440-2 ;  provis¬ 
ion  in  Kansas  City  natural  gas 
franchise,  617.  See  Franchises, 
non-exclusive ;  Assignment  of 
franchise. 

Competitor :  assignment  to,  forbid¬ 
den,  280.  See  Competition,  As¬ 
signment  of  franchise. 

Complaints :  a  tribunal  for  hearing, 
99—100 ;  in  regard  to  telephone 


678 


INDEX  OF  VOLUME  I. 


service  or  charges,  Massachusetts, 
252 ;  under  telephone  monopoly, 
265  ;  board  of,  in  Ann  Arbor  water 
franchise,  408 ;  board  for  hear¬ 
ing,  in  Denver  water  franchise, 
444. 

Complimentary  telephones :  in  Wis¬ 
consin,  246  ;  abolished,  288. 

Compressed  air  franchise :  Dallas, 
Tex.,  523-5  ;  Richmond,  Va.,  525-8. 

Condemnation.  See  Eminent  do¬ 
main. 

Conduits :  electrical,  a  monopoly  in 
New  York  City,  66,  368  ;  required, 
90 ;  ownership  of,  137,  249 ;  in¬ 
sulation  of,  141  ;  development  of 
use  of,  144 ;  electrical,  Jersey 
City,  151 ;  electrical,  Salt  Lake 
City,  152-61  ;  electrical,  Duluth, 
162 ;  electrical,  Richmond,  164 ; 
change  of  location  at  expense  of 
company,  174 ;  location  pre¬ 
scribed,  177 ;  of  double  capacity, 
181  ;  space  for  city’s  wires  re¬ 
served,  189,  256 ;  monopoly  in 

New  York  City,  260  ;  in  Washing¬ 
ton,  D.  C.,  291  ;  size  prescribed, 
310 ;  renting  space  permitted, 
320 ;  regulation  of  telegraph,  in 
cities,  328,  334,  336,  337,  339 ; 
regulations  in  Chicago  telegraph 
franchise,  344  ;  of  Grand  Rapids 
Messenger  and  Packet  Company, 
350 ;  various  ways  of  providing, 
367  ;  franchises,  chapter  xii,  367— 
96 ;  municipal  conduits  in  Balti¬ 
more,  382 ;  in  Erie,  384  ;  in  New 
Britain,  386  ;  for  steam  and  wire 
systems,  Nashville,  493 ;  of  re¬ 
frigeration  systems  in  New  York, 
499,  500 ;  in  Baltimore,  subject 
to  removal  to  make  way  for 
municipal  constructions,  502-4  ; 
use  of  municipal,  compulsory, 
577.  See  Pipes,  Underground  con¬ 
struction,  Gas  mains,  Water  con¬ 
duits. 

Connecticut :  electric  railway  con¬ 
solidation,  126. 

Connections :  from  curb  line  to  be 
made  at  property  owners’  ex¬ 
pense,  504 ;  customers  to  receive 
a  refund  in  service  for  expense  of, 
532.  See  Service  pipes. 


Consents.  See  Property  owners’ 
consents. 

Consolidated  Gas  Company  of  New 
York :  number  of  subsidiary  com¬ 
panies,  29 ;  decision  of  Supreme 
Court  concerning,  43-5,  543-60. 

Consolidation :  of  different  indus¬ 
tries,  139-40 ;  mayor’s  sugges¬ 
tion  in  regard  to,  Jersey  City, 
152  ;  Salt  Lake  City  electric,  157  ; 
consent  of  city  required,  Seattle, 
183  ;  Denver  electric,  184-8  ;  Min¬ 
neapolis  electric,  196 ;  St.  Paul 
heating  and  electric,  200  ;  Chicago 
electric,  200,  204,  206 ;  Buffalo 

electric,  207-9 ;  forbidden  in  pro¬ 
posed  Atlantic  Telephone  fran¬ 
chise,  268  ;  Indianapolis  telephone, 
307 ;  Portland,  Ore.,  310 ;  Toledo 
telephone,  315 ;  forbidden,  Ann 
Arbor,  320 ;  of  telegraphic  com¬ 
panies,  forbidden,  328,  330,  338, 
339,  340,  341  ;  provision  against, 
Chicago,  347 ;  consent  for,  re¬ 
quired,  New  York  City,  363 ;  of 
conduit  companies  forbidden,  374  ; 
of  water  companies,  New  Haven, 
410 ;  with  another  company  ex¬ 
pressly  permitted,  Toledo  central 
heating  franchise,  484 ;  of  com¬ 
pressed  air  companies,  forbidden, 
525  ;  a  vote  for  by  a  director,  to 
be  a  misdemeanor,  550 ;  of  gas 
companies  in  New  York  City,  556, 
558  ;  of  gas  companies  in  Boston, 
561 ;  provisions  in  Kansas  City, 
Mo.,  natural  gas  franchise,  617 ; 
of  Baltimore  gas  and  electric  com¬ 
panies,  625 ;  of  Indianapolis  gas 
companies,  a  cause  for  forfeiture 
of  franchise  and  bond,  629.  See 
Assignment  of  franchise,  Com¬ 
bination,  Monopoly. 

Constitutional  limitations :  general, 
23 ;  of  public  utilities  in  Cali¬ 
fornia,  179-81. 

Construction  :  limit  of  time  for  com¬ 
mencing,  177,  269,  470.  521,  526; 
a  condition  of  grant,  Chicago  tele¬ 
graph,  347 ;  must  be  approved  by 
city  engineer  before  commence¬ 
ment  of  work,  440 ;  must  be  best 
type  in  the  business,  482 ;  equip- 


INDEX  OF  VOLUME  I. 


679 


ment  and  operation  of  pneumatic 
tubes,  510-11  ;  subject  to  approval 
of  committee  on  streets,  526  ;  must 
begin  within  one  year,  548 ;  with¬ 
out  local  authorization,  557 ;  to 
begin  within  thirty  days,  589 ;  to 
be  completed  within  one  year,  596  ; 
to  begin  before  specified  date,  599  ; 
Cleveland  natural  gas  franchise, 
605 ;  time  set  for  beginning,  To¬ 
peka  natural  gas,  618  ;  must  begin 
within  sixty  days,  Indianapolis 
gas  franchises,  629,  635,  643  ;  Salt 
Lake  City  gas  system,  must  begin 
in  sixty  days,  653.  See  Super¬ 
vision,  Underground  construction 
Inspection,  Poles,  Wires.  Conduits. 

Consumers’  deposits :  advance,  98- 
9 ;  under  general  laws,  Cali¬ 
fornia,  180 ;  Minneapolis  electric, 
195 ;  St.  Paul  electric,  200 ;  in¬ 
terest  on,  New  York  City,  271 ; 
New  York  City  messenger  and  sig¬ 
nal,  363 ;  music  by  electricity, 
New  York,  366 ;  advance,  for  gas, 
St.  Paul,  579 ;  advance,  for  gas, 
Salt  Lake  City,  654.  See  Security 
fund,  Indemnity. 

Contracts :  control  of,  56-7,  197 ; 
secret,  in  regard  to  rates,  82 ; 
should  be  given  public  record,  94  ; 
in  rate  war,  Denver,  186  ;  compen¬ 
sation  for  telephone  equipment, 
222-3 ;  between  parent  company 
and  local  telephone  companies, 
300 ;  for  joint  use  of  telegraph 
fixtures,  329  ;  water  contract,  New 
Haven,  411-6;  between  distribu¬ 
ting  and  pipe  line  companies,  615, 
628.  See  Public  lighting,  Joint 
use  of  fixtures,  Parent  and  hold¬ 
ing  companies,  Patents. 

Control,  public :  of  the  telephone, 
238.  See  Supervision,  Streets, 
Construction,  Inspection,  Munici¬ 
pal  control.  Parent  and  holding 
companies. 

Corruption :  early  development  in 
franchise  granting,  3 ;  tempta¬ 
tions  to  public  wrong  and  how  to 
prevent  them,  chap,  iv,  101-23 ; 
in  telephone  business,  255 ;  free 
telephone  service  to  officials,  for¬ 


bidden,  275 ;  New  Haven  water 
company  charged  with,  413,  415, 
417.  See  Bribery,  Discrimination. 

Cost  of  service :  increase  of,  in  tele¬ 
phony,  with  increase  of  business, 
232-7.  See  Rates,  Measured  rates, 
Minimum  charge. 

Court :  supreme,  of  Pennsylvania, 
decision  on  rates,  82 ;  of  arbitra¬ 
tion,  112  ;  appeal  to,  on  rates,  St. 
Paul  electric,  200 ;  franchise  con¬ 
ditions  approved  by  probate,  312- 
13 ;  appeal  to,  for  adjustment  of 
telephone  pole  license  fees,  329  ; 
judge  of  state  circuit,  as  arbitra¬ 
tor,  390 ;  arbitration  of  rates  by, 
505.  See  United  States  Supreme 
Court,  Arbitration,  Appraisal. 


Dallas,  Texas  :  compressed  air  fran¬ 
chise,  523—5 ;  fuel  oil  franchise, 
531. 

Damage :  to  other  fixtures,  169  ;  for 
cutting  of  trees  by  telegraph  com¬ 
panies,  329  ;  to  streets  caused  by 
leakage  or  explosion,  494.  See 
Damages,  Indemnity. 

Damages :  civil,  77 ;  company  made 
responsible  for,  152,  329  ;  for  neg¬ 
lect  to  give  service,  180;  to  prop¬ 
erty  owners,  253 ;  liability  for, 
271  ;  provision  for,  in  water  fran¬ 
chise,  403 ;  for  failure  to  furnish 
water,  411  ;  city  indemnified 
against,  526 ;  company  liable  for, 
583  ;  bond  to  protect  city  against, 
592.  See  Damage,  Indemnity. 

Debt-limit :  of  Indiana  municipali¬ 
ties,  417-18. 

Denver :  competition  in  electric 

lighting,  142-3 ;  electrical  fran¬ 
chises,  184-8;  number  of  tele¬ 
phones  in,  242 ;  messenger  service 
franchise,  356 ;  competition  in 
water  business  followed  by  mo¬ 
nopoly,  440-5. 

Delays:  exemption  of  companies 
from  penalties  for,  56,  443,  459, 
470,  608,  653 ;  caused  by  litiga¬ 
tion,  430. 

Deposits.  See  Consumers’  deposits. 

Depreciation  :  not  provided  for,  251 ; 


680 


INDEX  OF  VOLUME  I. 


fund  provided,  284 ;  in  Washing¬ 
ton,  D.  C.f  telephone  business, 
293. 

Des  Moines :  gas  franchise,  579-82. 

Detroit :  street  car  service  in,  5 ; 
street  railway  capitalization,  108 ; 
municipal  electric  lighting,  141  ; 
central  heating,  469-73 ;  gas 
franchise,  655-9. 

Directors :  city  offered  minority 

representation  by  Baltimore  gas 
and  electric  company,  625-6 ; 
must  be  residents,  Indianapolis 
gas  franchise,  629. 

Directory :  telephone,  231,  322 ;  ex¬ 
tra  listings,  232,  322 ;  one,  for 
different  companies,  258  ;  of  Chi¬ 
cago  Telephone  Company,  278 ; 
quarterly,  287. 

Discounts  and  rebates :  in  electric 
rates,  Jersey  City,  152 ;  in  Salt 
Lake  City  electric  rates,  153,  159, 
160 ;  on  electric  bills,  Rockford, 
Ill.,  169-71  ;  on  electric  bills, 
Wichita,  Ks.,  172 ;  on  electric 
bills,  Atlanta,  177 ;  on  electric 
bills,  Columbus,  O.,  179 ;  on  elec¬ 
tric  rates,  Denver,  187 ;  on  Min¬ 
neapolis  electric  bills,  193 ;  on 
Chicago  electric  bills,  203 ;  tele¬ 
phone,  246-8 ;  to  municipalities, 
255  ;  on  telephone  bills,  288,  310 ; 
for  payment  in  advance,  314  ;  of 
Atlantic  City  Sewerage  Company, 
462 ;  for  insufficient  heat,  South 
Bend  central  heating,  480 ;  on 
Dallas  compressed  air  bills,  524 ; 
on  Des  Moines  gas  bills,  580 ;  on 
Nashville  gas  bills,  587 ;  on  gas 
bills,  Newport,  Ky.,  591 ;  for  in¬ 
ferior  quality  of  gas,  598 ;  on 
Cleveland  natural  gas  bills,  605 ; 
on  Columbus  gas  bills,  606,  608, 
609 ;  on  gas  bills,  Kansas  City, 
Mo.,  609;  in  Wheeling,  621,  622; 
on  Salt  Lake  City  gas  bills,  653, 
655 ;  on  Detfoit  gas  bills,  656. 
See  Penalty,  Special  rates,  Re¬ 
bates,  Compensation  for  franchise, 
Reduced  rates,  Special  rates. 

Discrimination :  in  rates,  53-5 ; 

should  be  forbidden,  79-85 ;  in 
the  electrical  industry,  142 ;  Du¬ 


luth  electric,  163 ;  Nashville  elec¬ 
tric,  166-8 ;  Minneapolis  electric, 
191-5 ;  in  heating  and  electric 
franchise,  St'.  Paul,  198 ;  in  Chi¬ 
cago  electric  franchise,  203 ;  Buf¬ 
falo  electric,  209 ;  discussion  of, 
in  electrical  business,  213 ;  in 
telephone  rates,  245-9  ;  in  service, 
forbidden,  Massachusetts,  254  ;  for¬ 
bidden,  Chicago  Telephone  Com¬ 
pany,  276;  forbidden,  New  Or¬ 
leans  telephone  franchise,  288 ; 
forbidden  on  long  distance  tele¬ 
phone  connections,  306,  315 ; 

should  be  provided  against  in  use 
of  conduits,  369 ;  provisions  in 
New  York  conduit  franchise,  376, 
377 ;  provision  in  Kansas  City 
conduit  franchise,  390 ;  hy  New 
Orleans  water  company,  437 ;  by 
Standard  Oil  Company,  forbidden, 
529 ;  provision  in  St'.  Paul  gas 
franchise,  577 ;  special  rates  for 
gas,  Kansas  City,  614 ;  provision 
in  Indianapolis  natural  gas  fran¬ 
chise,  637 ;  uniform  price,  Erie, 
Pa.,  natural  gas,  650 ;  provision 
in  Detroit  gas  franchise,  655,  659. 
See  Special  rates. 

Dishonesty :  of  utility  employees, 
119,  120. 

District  of  Columbia.  See  Wash¬ 
ington. 

Division  of  profits  with  city :  dis¬ 
cussion  of  gross  receipts  and  net 
earnings,  39 ;  tax  on  dividends, 
58-9.  See  Compensation  for 
franchises,  Gross  receipts,  Net 
earnings. 

Division  of  territory  :  in  Buffalo  elec¬ 
tric  franchise,  207 ;  hy  New  York 
City  lighting  companies,  209-11  ; 
in  Detroit  gas  franchise,  forbid¬ 
den,  658. 

Dunne,  Mayor  Edward  F. :  objec¬ 
tions  to  Chicago  gas  ordinance, 
661. 

Duluth :  electric  light  and  power 
franchises,  161-4  ;  conduit  fran¬ 
chise,  391-2 ;  central  heating 
franchise,  488. 

Duplication  of  plant :  disadvantages 
of,  30 ;  excess  of  poles  and  wires 


INDEX  OF 

in  streets  forbidden,  165 ;  removal 
of  duplicate  poles  required,  187 ; 
division  of  territory,  to  prevent, 
207 ;  in  telephone  business,  237- 
9 ;  in  Washington,  D.  C.,  393. 
Duration  of  central  heating  fran¬ 
chises  :  Detroit,  469 ;  Kalamazoo, 
473;  Salt  Lake  City,  477,  478; 
Seattle,  479 ;  South  Bend,  Ind., 
480 ;  Kansas  City,  Mo.,  481 ;  To¬ 
ledo,  483  ;  Indianapolis,  486  ;  Du¬ 
luth,  488 ;  New  York,  dependent 
on  amount  of  extensions,  490 ; 
Nashville  steam  and  conduit  sys¬ 
tem,  492 ;  one  hundred  years, 
Lockport,  N.  Y.,  495  ;  steam  heat¬ 
ing  and  electric  power,  496 ;  La 
Crosse,  Wis.,  497. 

Duration  of  conduit  franchises :  St. 
Louis,  372 ;  Kansas  City,  389 ; 
Minneapolis,  391 ;  Duluth,  391- 
2 ;  Washington,  D.  C.,  394. 
Duration  of  electric  franchises : 
Jersey  City,  151  ;  Salt  Lake  City, 
153,  154-8;  Duluth,  161-2;  Rich¬ 
mond,  Va.,  164 ;  Nashville,  167 ; 
Rockford,  Ill.,  170 ;  Grand  Rapids 
power,  175 ;  Cedar  Rapids,  la., 
175 ;  Atlanta,  176 ;  Columbus,  O., 
179;  Seattle,  183;  Denver,  187; 
Minneapolis,  188,  197 ;  Chicago, 

201. 

Duration  of  franchises :  general,  34- 

9. 

Duration  of  gas  franchises :  New 
York  City,  544,  546,  547,  548,  549, 
550,  553,  554,  559 ;  Minneapolis, 
573 ;  St.  Anthony,  573 ;  St.  Paul, 
576,  579 ;  Saginaw,  585 ;  Nash¬ 
ville,  587;  Springfield.  Ill.,  588; 
Newport,  Ky.,  591,  592 ;  Cincin¬ 
nati,  598 ;  Columbus,  O.,  607 ; 

Kansas  City,  Mo.,  609,  612 ;  To¬ 
peka,  Ks.,  618,  619 ;  Wheeling, 

621,  622 ;  Baltimore,  no  limits, 
623;  Indianapolis,  640,  643;  Salt 
Lake  City,  650-2 ;  Detroit,  657. 
Duration  of  messenger  and  signal 
franchises :  Grand  Rapids,  352 ; 
Salt  Lake  City,  353  ;  Seattle,  355  ; 
Denver,  357 ;  Portland,  Ore.,  358 ; 
Butte,  360 ;  Springfield,  Ill.,  362 ; 
New  York  City,  362. 


VOLUME  I.  681 

Duration  of  oil  pipe  line  franchises : 
Dallas,  532. 

Duration  of  pneumatic  tube  fran¬ 
chises  :  St.  Louis,  520 ;  Chicago, 
522 ;  Richmond,  Va.,  526. 

Duration  of  refrigeration  franchises  : 
Lockport,  495  ;  New  York  City, 
499,  500  ;  Baltimore,  503  ;  Kansas 
City,  505.  ' 

Duration  of  sewer  franchises :  Long 
Branch,  N.  J.,  455 ;  Austin,  Tex., 
457. 

Duration  of  telegraph  franchises : 
Chicago,  344. 

Duration  of  telephone  franchises : 
Massachusetts,  257 ;  New  York 
City,  266;  Chicago,  274;  Indian¬ 
apolis,  305 ;  Portland,  Ore.,  308, 
311;  St.  Paul,  317;  Ann  Arbor, 
319 ;  for  transmission  of  music. 
New  York  City,  365. 

Duration  of  water  franchises ;  lim¬ 
ited,  403 ;  in  New  Haven,  414 ; 
Indiana,  418 ;  California,  425  ; 
Los  Angeles,  432 ;  New  Orleans, 
436 ;  Denver,  440-3 ;  perpetual, 
Butte,  445 ;  Birmingham,  Ala., 
447. 

Eighty-cent  gas  case,  43-5,  543, 
560. 

Electric  clock  franchise,  355. 

Electrical  conduits :  franchises  and 
municipal  systems,  chap.  xii, 
367-96. 

Electricity :  regulations  as  to  trans¬ 
mission,  in  Massachusetts,  253 ; 
grant  included  in  central  heating 
franchise,  477,  479,  485 ;  to  be 
used  as  motive  power  with  pneu¬ 
matic  tubes,  517 ;  with  gas  fran¬ 
chise,  557  ;  with  gas  and  steam  in 
Salt  Lake  City,  652.  See  Electric 
Light,  heat  and  power. 

Electric  light,  heat  and  power ;  sta¬ 
tistics  of,  2 ;  significance  of,  27 ; 
minimum  rate,  54  ;  surplus  power, 
70;  inquiry  into  rates,  83-5; 
safety  appliances,  89  ;  advance  de¬ 
posits,  98-9 ;  tendency  toward 
consolidation,  126;  electric  light, 
heat  and  power  as  a  public  util¬ 
ity,  chap,  vi,  135-49 ;  franchise 


682 


INDEX  OF  VOLUME  I. 


conditions  imposed  on  electric 
light  and  power  companies,  chap, 
vii,  150-216 ;  comparison  with 
the  telephone  219-20  ;  steam  heat¬ 
ing  and  electric  power  combined, 
496 ;  supplied  by  gas  company,  St. 
Paul,  579.  See  Electricity. 

Electrolysis,  141 ;  prevention  of, 
383,  384. 

Eminent  domain :  exercise  of  right 
by  city,  179,  417 ;  right  given  to 
New  Haven  water  company,  410 ; 
by  private  water  company,  418, 
438  ;  by  city  on  behalf  of  private 
water  company,  447  ;  Atlantic  City 
reserves  right  to  acquire  fran¬ 
chise  by  condemnation,  463 ;  in 
Columbus  central  heating  fran¬ 
chise,  477 ;  pneumatic  tube  com¬ 
pany,  New  York  City,  517 ;  gas 
company,  New  York  City,  557 ; 
city  may  acquire  property,  fran¬ 
chises,  etc.,  by  condemnation,  608  ; 
right  given  to  private  gas  com¬ 
panies  in  Pennsylvania,  649. 

Employees :  treatment  of,  55,  56 ; 
skill  should  be  required,  91-3 ; 
convict  and  union  labor  in  Nash¬ 
ville  electric  franchise,  168  ;  stipu¬ 
lation  for  skill,  Columbus  electric 
franchise,  178 ;  statistics  of,  in 
electric  and  telephone  service,  220  ; 
of  Indianapolis  water  company 
must  abstain  from  use  of  liquor, 
423 ;  union  labor,  Detroit  central 
heating  franchise,  473 union 
labor  in  Nashville  central  heating 
franchise,  convict  labor  forbidden, 
493  ;  sanitary  accommodations  for 
street  gangs  must  be  provided, 
520 ;  Nashville  gas  company  not 
to  employ  convict  labor,  587. 

Equipment :  ownership  of  electrical, 
137-8 ;  telephone,  249-51  ;  for 
telephone  branch  exchanges,  288 ; 
rentals  charged  by  parent  tele¬ 
phone  company,  294,  299,  300 ; 

subscribers  should  be  allowed  to 
purchase  telephone  fixtures,  322  ; 
of  pneumatic  tubes,  510-11  ;  for 
public  gas  lighting,  New  York  City, 
545,  546,  547,  553;  St.  Paul,  578; 
Des  Moines,  580  ;  for  gas  lighting, 


Springfield,  Ill.,  589 ;  for  public 
gas  lighting,  Newport,  Ky.,  591 ; 
Cleveland,  599,  601  ;  Kansas  City, 
Mo.,  616;  Topeka,  Ivs.,  618.  See 
Fixtures,  Underground  construc¬ 
tion,  Poles,  Wires,  Conduits,  Gas 
mains.  Water  mains. 

Erie,  Pa. :  poles  and  wires,  329-30 ; 
telephone  and  fire  alarm,  357 ; 
electrical  conduits,  385 ;  gas 
franchises,  649-50. 

Excavations  in  the  streets  :  must  be 
properly  protected,  446,  455-6, 

519.  See  Construction,  Under¬ 
ground  construction,  Poles,  Pipes, 
Conduit's,  Gas  mains,  Water 
mains,  Streets,  Compensation  for 
franchises. 

Exchanges  :  telephone  statistics,  237. 

Exclusive  franchises :  grant  of,  15 ; 
Cedar  Rapids  electric,  175  ;  Wash¬ 
ington  conduit  proposed,  394 ; 
water,  403  ;  Ann  Arbor. water,  404  ; 
of  New  Haven  water  company, 
416  ;  forbidden  in  California,  425  ; 
granted  to  Los  Angeles  water  com¬ 
pany,  432  ;  of  New  Orleans  water 
company,  436 ;  for  sewerage  sys¬ 
tem,  Long  Branch,  N.  J.,  455  ;  for 
gas,  536 ;  for  gas  in  New  York 
City,  544,  549,  551,  559 ;  for  gas 
in  Minneapolis,  573 ;  forbidden  in 
St.  Paul  charter,  576 ;  for  gas  in 
Springfield,  Ill.,  588,  590;  New¬ 
port,  Ky.,  gas  franchise,  591 ; 
Wheeling  gas,  621,  622 ;  for  gas 
light  only,  in  Pennsylvania,  650. 
See  Monopoly ;  Franchise,  non-ex¬ 
clusive. 

Exclusive  license:  telephone,  222. 

Exemption  :  of  companies  from  pen¬ 
alties  for  non-performance  of  obli¬ 
gations,  56,  470,  653 ;  from  mak¬ 
ing  reports,  258  ;  from  regulations, 
259 ;  from  gross  earnings  tax, 
318. 

Expiration  of  franchise  grants : 
varying  conditions  in  regard  to, 
16,  35;  at  different  times,  18;  re¬ 
newals  before  expiration,  20  ;  pur¬ 
chase  of  property,  59—63 ;  rever¬ 
sion  of  property  to  city,  63-4  ; 
purchase  authorized,  152 ;  in  case 


INDEX  OF  VOLUME  I. 


683 


city  undertakes  lighting,  164 ;  re¬ 
moval  of  fixtures,  176;  Chicago 
pneumatic  tube  system  to  revert 
to  city,  523 ;  when  city  may  pur¬ 
chase  franchise  of  Minneapolis 
gas  company,  573 ;  Springfield, 
Ill.,  gas,  590 ;  Newport,  Ky.,  gas 
franchise,  592 ;  Indianapolis  gas, 
643,  646.  See  Purchase,  Renewal 
of  franchises. 

Expiration  of  telephone  patents. 
See  Patents. 

Extensions :  sought  by  the  compa¬ 
nies,  19,  40  ;  demanded  by  the  pub¬ 
lic,  20,  40 ;  into  unprofitable  ter¬ 
ritory,  51-3 ;  provided  for  in 
franchise,  80—1  ;  Rockford,  Ill., 
electric,  170-1 ;  Grand  Rapids 
electric  power,  173 ;  Denver  elec¬ 
tric,  184,  186 ;  Minneapolis  elec¬ 
tric,  189,  190 ;  St.  Paul  electric 
and  heating,  199  ;  discussion,  214  ; 
telephone  extensions  required,  276, 
277 ;  of  telephone  business ;  New 
Orleans,  287 ;  public  hearing  in 
regard  to  extensions,  308 ;  of 
conduit  lines,  391  ;  of  water  sys¬ 
tem,  403,  406 ;  paid  for  out'  of 
earnings,  415 ;  limit  to  what  city 
may  require  within  one  year,  422  ; 
of  water  system,  438,  444 ;  of 
sewer  system  based  on  reasonable 
revenue,  458 ;  of  central  heating 
service,  471,  478,  482,  486 ;  not 
compulsory  unless  business  will 
yield  8  per  cent  on  investment, 
505 ;  by  New  York  City  gas  com¬ 
panies,  547,  554,  555 ;  in  Wor¬ 
cester  gas  franchise,  565 ;  in 
Philadelphia  gas  lease,  570 ; 
granted  only  upon  acceptance  of 
provisions  of  city  charter,  St. 
Paul,  576,  578 ;  in  Saginaw  gas 
franchise,  586 ;  city  must  guar¬ 
antee  income,  589,  590 ;  of  pipes 
for  public  lighting,  Newport,  Ky., 
591  ;  on  petition  of  property  own¬ 
ers,  592 ;  by  direction  of  council, 
594 ;  natural  gas  system,  Cincin¬ 
nati,  596 ;  city  may  extend  mains 
for  public  lighting,  Cleveland, 
599 ;  by  natural  gas  company, 
Cleveland,  605 ;  Columbus,  607 ; 


by  Kansas  City,  Mo.,  gas  com¬ 
pany,  610,  613 ;  by  Topeka,  Ks., 
artificial  gas  company,  621 ;  re¬ 
quirement  and  limitation  of,  Indi¬ 
anapolis  gas  franchises,  629,  631, 
634,  638 ;  petitioners  for,  must 
buy  stock  to  cover  cost,  644 ;  in 
Toledo  gas  franchise,  648  ;  in  Salt 
Lake  City  gas  franchises,  651, 
653  ;  in  Detroit  gas  franchise,  655. 
See  Renewal  of  franchises,  Dura¬ 
tion,  Suburban  districts. 

Extension  telephones :  of  Chicago 
Telephone  Company,  278-9 ;  in 
New  Orleans,  286  ;  in  Toledo,  312. 
See  Rates. 

Fares.  See  Rates. 

Favors.  See  Patronage. 

Federal  law :  indeterminate  fran¬ 
chise  under,  36 ;  monopoly  in 
Washington,  D.  C.,  289-303 ;  elec¬ 
trical  conduits  in  Washington, 
392-5. 

Fees.  See  Compensation  for  fran¬ 
chises. 

Filing  maps.  See  Maps. 

Filtration  :  Indianapolis  water,  419  ; 
New  Orleans  water  supply,  439. 

Fines :  for  failing  to  comply  with 

regulations,  Jersey  City,  151  ;  for 
injuring  company’s  equipment, 
162 ;  for  poor  telephone  service, 
271 ;  for  failure  to  make  report, 

272 ;  for  failure  to  make  exten¬ 

sions,  308,  613,  634,  644  ;  for  fail¬ 
ure  to  remove  poles,  331 ;  for  in¬ 
terfering  with  signal  boxes,  360 ; 
for  failure  to  replenish  security 
fund,  389 ;  for  wilfully  injuring 
water  or  property  of  company, 
410,  439 ;  for  injuring  pneumatic- 
tubes  or  contents,  516 ;  for  fail¬ 
ure  to  comply  with  regulations, 
527;  for  failure  to  repave,  593. 

•  See  Penalty,  Penalty  fund. 

Fisher,  Walter  L. :  quotation  from, 

102. 

Fixtures  in  the  streets :  at  expira¬ 
tion  of  franchise,  16,  35 ;  dupli¬ 
cation,  30 ;  demand  for  better, 
127-8 ;  in  electrical  industry, 
137-8;  joint  use,  164,  166;  map 


684 


INDEX  OF  VOLUME  I. 


required  in  electric  franchises, 
165,  173,  178 ;  temporary  re¬ 

moval  of,  176  ;  of  double  capacity, 
Seattle  electric  franchise,  181-2 ; 
Minneapolis  electric,  188-9 ;  St. 
Paul  heating  and  electric,  198-9 ; 
Buffalo  electric,  207  ;  general  pro¬ 
visions  in  Massachusetts,  211, 
253,  254,  256 ;  Springfield,  Mass., 
telephone,  256-7 ;  New  York  City 
telephone,  259 ;  removal  at  expira¬ 
tion  of  franchise,  346  ;  supervision 
of  construction,  354 ;  electrical 
conduits,  chap,  xii,  367-96 ;  im¬ 
portant  provision  in  Columbus  cen¬ 
tral  heating  franchise,  475 ;  in 
New  York  central  heating  fran¬ 
chises,  489,  490 ;  subways  and 

pipe  lines  for  refrigeration  and 
heat,  502,  t>03,  504,  506 ;  pneu¬ 
matic  tubes,  chap,  xvii,  507-28 ; 
oil  pipe  lines,  529-32.  See  Gas 
mains,  Service  pipes,  Water  pipes, 
Water  conduits,  compensation  for 
franchises,  Maps,  Joint  use.  Un¬ 
derground  construction,  Poles, 
Wires. 

Flat  rates :  in  transportation,  85 ; 
maximum  for  electric  power,  Du¬ 
luth,  162 ;  in  the  telephone  busi¬ 
ness,  234,  262 ;  flat  rates  versus 
measured  rates,  242-5,  265 ;  New 
Orleans  telephone,  288 ;  Washing¬ 
ton,  D.  C.,  telephone,  289,  291, 
302 ;  Indianapolis  telephone,  303  ; 
Portland,  Ore.,  telephone,  312 ; 
Toledo  telephone,  314  ;  Minneapolis 
and  St.  Paul  telephone,  317  ;  Ann 
Arbor  telephone,  319^-20 ;  for 
water,  New  Haven,  414 ;  for 
water,  Butte,  445-6 ;  natural  gas 
in  Indianapolis,  636.  See  Rates, 
Maximum  rates. 

Flushing.  See  New  York  City. 

Forfeiture  of  franchises :  for  non¬ 
user,  72  ;  on  account  of  secret  con¬ 
tracts,  82 ;  for  failure  to  record 
transfers,  94  ;  on  proof  of  bribery, 
109,  111  ;  on  account  of  campaign 
contributions,  109  ;  for  jury  fixing, 
111  ;  as  penalty  for  transfer  of 
rights,  154,  319 ;  as  penalty  for 
discrimination,  163 ;  for  removal 


of  headquarters,  166 ;  for  assign¬ 
ment  without  consent  of  city,  177  ; 
for  violation  of  terms,  258 ;  for 
failure  to  operate,  271,  495 ;  for 
failure  to  maintain  security  fund, 
273 ;  for  failure  to  fulfil  condi¬ 
tions,  283,  310 ;  tangible  property 
forfeited  with  franchise,  307 ;  for 
selling  out  to  competitor,  315  ;  for 
failure  to  operate  telegraph  busi¬ 
ness,  343 ;  for  telegraph  consoli¬ 
dation,  338-40,  341 ;  for  failure 
to  pay  annual  fees,  346 ;  for  fail¬ 
ure  to  give  service,  347 ;  messen¬ 
ger  and  signal  franchises,  351-2, 
354,  355,  359  ;  conduits,  New  York 
City,  377,  378,  382  ;  Kansas  City, 
390 ;  proposed  conduit  franchise, 
Washington,  D.  C.,  395 ;  for  fail¬ 
ure  to  give  good  service,  419  ;  New 
Orleans  water  franchise,  436-9 ; 
Butte  water  franchise,  446 ;  cen¬ 
tral  heating  franchise,  Detroit, 
470  ;  Columbus,  477  ;  Seattle,  479  ; 
for  failure  to  operate  promptly, 
South  Bend,  Ind.,  central  heating, 
480  ;  in  three  years,  if  not  operat¬ 
ing  specified  length  of  mains,  New 
York  central  heating,  490,  492 ; 
for  employing  non-union  men, 
Nashville  central  heating,  493 ; 
Kansas  City  refrigeration,  505 ; 
for  failure  to  construct  promptly, 
506 ;  for  failure  to  operate  or  to 
renew  indemnity  bond,  520 ;  of 
pneumatic  tubes  if  used  for  other 
purposes  than  transmission  of 
mail,  521  ;  for  violation  of  munici¬ 
pal  regulations,  531  ;  in  New  York 
City,  for  failure  to  fulfil  condi¬ 
tions,  546,  548 ;  for  forming  a 
combination,  555 ;  for  violating 
terms,  556 ;  for  failure  to  comply 
with  ordinances,  566 ;  for  refusal 
to  accept  city’s  regulation  of  rates, 
580 ;  for  failure  to  give  good  serv¬ 
ice,  Saginaw  gas,  582  ;  not  to  re¬ 
sult  from  temporary  failure  to 
fulfil  conditions,  Cleveland  gas, 
600  ;  for  failure  to  operate  within 
stated  time,  Columbus,  607 ;  for 
contriving  delays  in  construction, 
Kansas  City,  Mo.,  610 ;  for  60 


INDEX  OF  VOLUME  I. 


685 


days  failure  to  comply  with  pro¬ 
visions  of  natural  gas  franchise, 
615,  617 ;  as  penalty  for  consoli¬ 
dation,  629 ;  in  Indianapolis,  de¬ 
pendent  upon  judicial  decision, 
630  ;  for  failure  to  live  up  to  con¬ 
tract,  634  ;  for  failure  to  put  plant 
in  operation  within  specified  time, 
Toledo  gas,  647 ;  in  case  of  con¬ 
solidation,  Erie  gas,  650 ;  provis¬ 
ions  in  Salt  Lake  City  gas 
franchises,  651,  653.  See  Rever¬ 
sion. 

Fourteenth  amendment  to  United 
States  constitution :  as  affecting 
rate  regulation,  42 ;  as  affecting 
corporate  litigation,  113. 

Franchise :  what  a  franchise  signi¬ 
fies,  chap,  ii,  25-31  ;  definition  of, 
28 ;  not  to  be  valued  when  city 
buys  plant,  Nashville,  168  ;  not  to 
be  paid  for  if  plant  is  purchased, 
Minneapolis  electric,  195 ;  electric 
light,  214-6 ;  Chicago  telephone, 
252 ;  capitalization  of,  by  Wash¬ 
ington  telephone  company,  292 ; 
not  to  be  considered  in  appraisal 
of  property,  Portland,  311 ;  cash 
value  estimated,  Portland,  Ore., 
359  ;  value  of,  not  to  be  included 
in  valuation,  Kansas  City  electri¬ 
cal  subway,  390 ;  value  of,  393 ; 
not  to  be  paid  for,  Indianapolis 
water,  420 ;  Toledo  central  heat¬ 
ing  franchise  to  be  considered  as 
an  entirety,  485  ;  not  to  be  valued 
as  against  the  city,  Chicago  pneu¬ 
matic  tubes,  523 ;  not  to  be  con¬ 
sidered  in  appraisal  of  property 
for  purchase,  Springfield,  Mass., 
566 ;  Nashville,  587  ;  Kansas  City, 
Mo.,  611  ;  Wheeling,  621,  622  ;  De¬ 
troit,  658.  See  Appraisal,  Pur¬ 
chase,  Arbitration. 

Franchise  drafting :  by  applicants, 
8.  See  Franchise  provisions  rec- 
omended. 

Franchise  granting :  how  franchise 
rights  are  acquired,  chap,  i,  1-24  ; 
competitive  grants  in  electrical  in¬ 
dustry,  142-3  ;  conditioned  on  sur¬ 
render  of  prior  rights,  216 ;  tele¬ 
phone,  In  Massachusetts,  257 ; 


without  compensation,  telephone 
in  New  York  City,  259 ;  at  expi¬ 
ration  of  term,  311  ;  by  Probate 
Court,  Toledo  telephone,  312  ;  con¬ 
ditioned  upon  operation,  347 ;  for 
water  systems,  402  ;  to  water  com¬ 
panies  in  Indiana,  417 ;  condi¬ 
tioned  upon  acquisition  of  exist¬ 
ing  plant,  Lockport,  N.  Y.,  central 
heating,  495  ;  by  executive  officials 
of  New  York  City,  552  ;  after  pub¬ 
lic  advertisement,  Springfield,  Ill., 
588 ;  to  highest  and  best  bidder, 
Newport,  Ky.,  591.  See  Adver¬ 
tisement,  Compensation,  Accept¬ 
ance. 

Franchise  provisions  recommended : 
primary  considerations,  32 ;  pur¬ 
chase  of  fixtures,  36 ;  indetermi¬ 
nate  franchises,  36,  37  ;  compensa¬ 
tion  for  franchises,  39 ;  fixing  of 
rates,  41-2 ;  regulation  of  rates, 
42-6,  65 ;  special  taxes,  46-8 ; 

special  obligations,  49-51  ;  service, 
51  ;  extensions,  51-3 ;  minimum 
charge,  53-4 ;  employees,  55-6 ; 
91-3,  94 ;  controlling  contracts, 

56 ;  sliding  scale  device,  57-8 ; 
division  of  profits  with  city,  58-9  ; 
right  of  purchase,  59-62 ;  rever¬ 
sion  of  property  to  city,  63-4 ; 
auxiliary  enterprises,  65-6 ;  sale 
of  accessories  and  by-products, 
67-9 ;  sale  of  special  privileges 
and  surplus  services,  69-70 ;  for¬ 
feiture  clause,  72 ;  property  own¬ 
ers’  consents,  74-6;  location  of 
works,  76;  civil  damages,  77; 
special  service,  77-8  ;  elimination 
of  nuisances,  78-9 ;  service  com¬ 
pulsory,  79-81  ;  discrimination  for¬ 
bidden,  81-5 ;  publicity  of  ac¬ 
counts,  82 ;  inspection  of  meters, 
85-7 ;  standard  quality  of  service 
required,  87-8 ;  safety  regulations 
and  appliances,  88-90 ;  under¬ 
ground  construction,  90-1  ;  identi¬ 
fication  of  responsible  company, 
93-4 ;  rights  of  different  users  of 
the  streets,  94-8;  limitation  of 
obligations  to  be  imposed  upon  con¬ 
sumers,  98-9  ;  complaints,  99-100  ; 
prevention  of  corruption,  101-9 ; 


686 


INDEX  OF  VOLUME  I. 


to  prevent  interference  in  nomi¬ 
nations  and  elections,  109-111  ; 
damage  claims,  111-12;  publicity 
of  names  of  stockholders,  114  ;  to 
prevent  over-capitalization,  116- 
17  ;  up-keep  of  equipment,  119  ;  to 
conserve  safety,  comfort  and 
beauty,  120-1  ;  most  important 
features  of  electric  franchises 
212-16 ;  important  point's  of  a 
telephone  franchise,  320-2 ;  usual 
characteristics  of  a  telegraph 
franchise,  327-8 ;  important  fea¬ 
tures  of  conduit  franchises,  368- 
70 ;  characteristics  of  a  model 
water  franchise,  402-4 ;  special 
features  of  gas  franchises,  536-7  ; 
artificial  and  natural  gas  fran¬ 
chises  compared,  540-2. 

Franchise  rights :  how  acquired,  1- 
23. 

Franchises,  limited :  importance  of, 
403.  See  Duration  of  franchises, 

Franchises  with  no  time  limit. 

Franchises,  non-exclusive :  Duluth 
electric,  161 ;  Minneapolis  electric, 
197 ;  Portland,  Ore.,  telegraph, 
344 ;  Chicago  telegraph,  348 ; 
Butte  messenger  and  signal,  360 ; 
general  law  for  conduits  in  New 
York,  374 ;  Syracuse  independent 
conduit,  389 ;  Kansas  City  con¬ 
duit,  391 ;  Indianapolis  water, 
420 ;  California,  425 ;  for  water 
supply  in  Denver,  441  ;  Birming¬ 
ham,  Ala.,  water,  447 ;  Detroit 
central  heating,  470 ;  Columbus 
central  heating,  477 ;  for  steam 
heat  and  power,  Seattle,  479 ; 

New  York  refrigeration,  501  ;  Bal¬ 
timore  refrigeration,  503 ;  of  New 
Y’ork  gas  companies,  546,  547, 

548,  554;  St.  Paul  gas,  576; 

Wheeling  gas,  622.  See  Exclusive 
franchises. 

Franchises  with  no  time  limit : 
Birmingham  water,  447 ;  Duluth 
central  heating,  488 ;  Baltimore 
gas.  623 ;  New  York  gas,  559. 
See  Duration  of  franchises,  Per¬ 
petual  franchises. 

Free  service :  lighting  churches  on 
Staten  Island,  19,  210;  to  offi- 1 


cials,  106-7 ;  to  public  buildings, 
Salt  Lake  City  electric,  154, 
156,  157,  159 ;  Duluth  electric, 

162 ;  Nashville  electric,  167 ; 
Wichita,  Ks.,  electric,  172 ;  Cedar 
Rapids  electric,  175 ;  Columbus 
electric,  178 ;  New  York  city 
electric,  210 ;  Wisconsin  tele¬ 
phone,  245-8 ;  Massachusetts 
telephone,  255,  256 ;  New  York 

city  telephone,  263,  267 ;  Chicago 
telephone,  275 ;  Portland,  Ore., 
telephone,  308-11  ;  Toledo  tele¬ 
phone,  314 ;  Minneapolis  and  St. 
Paul  telephone,  317 ;  Ann  Arbor 

telephone,  319,  320  ;  telegraph  ser¬ 
vice,  328,  339,  342 ;  signal  and 

messenger  service,  353,  356,  357, 
359,  360,  361  ;  music  by  electricity 
in  New  York  city,  365 ;  water 
from  hydrants,  406 ;  wrater  for 

public  purposes,  418 ;  Indiana¬ 
polis  water,  421 ;  water  in  Los 
Angeles,  433  ;  New  Orleans  water, 
437 ;  Denver  water,  444 ;  sewer¬ 
age  of  public  buildings,  456,  459, 
461 ;  refrigeration  for  public  pur¬ 
poses,  501  ;  gas,  615-6,  618,  622, 
623,  654.  See  Compensation  for 
franchises. 

Free  use  of  fixtures.  See  Compen¬ 
sation  for  franchises. 

Free  water.  See  Compensation  for 
franchises. 

Fuel :  use  of  natural  gas,  538 ; 
separate  rate  for  fuel  gas  in 
Springfield,  Ill.,  590 ;  natural  gas 
franchise  for  heat  and  fuel,  604  ; 
natural  gas  for  fuel  only,  Wheel¬ 
ing,  622  ;  Detroit  gas,  656. 

Garfield,  Secretary  James  R. : 
on  the  Ketch  Hetchy  water 
scheme  of  San  Francisco,  427-8. 

Garst,  Dr.  Julius :  opinion  relative 
to  indeterminate  franchise  in 
Massachusetts,  37,  note;  bill 
regulating  telephones,  proposed 
by,  257. 

Gas :  general  discussion  and  fran¬ 
chises  of  various  cities,  chapters 
xix,  xx  and  xxi,  533-662  :  quality 
of,  553-4,  575,  577,  589,  591, 


INDEX  OF  VOLUME  I. 


687 


601,  615,  630,  633,  634,  648,  651, 
653  ;  extraordinary  powers  given  to 
gas  company,  557 ;  coal  gas,  577, 
586 ;  water  gas,  577,  586 ;  what 
gas  bills  must  specify,  586,  656 ; 
substitute  permitted,  592 ;  con¬ 
tract  between  supply  and  distribut¬ 
ing  companies,  615,  628 ;  amount 
of  natural  gas  to  be  furnished  in 
30  days,  Topeka,  618  ;  price  graded 
according  to  output  of  plant,  619  ; 
artificial  to  be  supplied  if  natural 
fails,  Topeka,  621 ;  first  fran¬ 
chise  in  United  States,  Baltimore, 
623 ;  Detroit  gas  company  may 
assign  property,  or  lease  other  gas 
property,  660. 

Gas,  artificial :  statistics  of,  1 ; 
significance  of,  as  utility,  27  ;  80- 
cent  rate  case,  43-5 ;  sliding 
scale  device,  57-8 ;  surplus  ser¬ 
vice,  69 ;  location  of  works,  76 ; 
pressure  regulators,  78 ;  advance 
deposits,  98-9 ;  competition  in 
New  York  city,  124 ;  artificial 
and  natural  gas  as  public  utilities, 
chap,  xix,  533-43 ;  gas  franchises 
where  only  artificial  gas  is  avail¬ 
able,  chap,  xx,  543-94 ;  artificial 
gas  franchises  in  cities  within 
reach  of  natural  gas  fields,  in 
chap,  xxi ;  Cleveland,  599  ;  Kansas 
City,  Mo.,  609 ;  Topeka,  619 ; 
Baltimore,  623  ;  Indianapolis,  629, 
640 ;  Erie,  649 ;  Salt  Lake  City, 
650 ;  Detroit,  655 ;  Chicago,  659. 
See  Rates,  Deposits. 

Gas  mains  :  mains  and  service  pipes 
must  he  laid  in  advance  of  paving, 
588 ;  minimum  construction  stipu¬ 
lated,  Springfield,  Ill.,  589 ;  to  be 
laid  where  council  directs,  594 ; 
unsuitable  mains  to  be  replaced, 
597 ;  material  prescribed,  Cleve¬ 
land,  599  ;  to  he  laid  on  both  sides 
of  streets,  604 ;  outer  and  inner 
pipes  required,  Columbus,  606-7 ; 
depth  prescribed,  Topeka,  618 ; 
city  to  repay  cost,  Baltimore,  624  ; 
to  be  laid  in  alleys,  Indiana¬ 
polis,  635 ;  not  to  be  laid  until 
supply  pipes  are  connected  with 
gas  fields,  638  ;  only  one  to  be  laid 


in  a  street,  Salt  Lake  City,  651 ; 
one  on  each  side  of  street  re¬ 
quired,  653 ;  position  of,  Detroit, 
655.  See  Extensions. 

Gas,  natural :  decision  of  Pennsyl¬ 
vania  court  as  to  rates,  82 ;  for 
heating  and  lighting,  537-40 ;  ar¬ 
tificial  and  natural  gas  as  public 
utilities,  chap,  xix,  533-42 ;  gas 
franchises  in  cities  within  reach 
of  natural  gas  fields,  chap.  xxi. 
595-662. 

General  franchises :  Denver  electric, 
142  ;  Boston  permits,  519  ;  Indian¬ 
apolis  natural  gas,  635-40.  See 
General  laws,  Legislature. 

General  laws :  constituting  fran¬ 
chise  grants,  11,  253 ;  relating  to 
electricity,  Kansas,  171  ;  electric 
lighting  in  California,  ISO ;  reg¬ 
ulating  telephone  companies  in 
Massachusetts,  252-8 ;  telephone 
franchises,  Ohio,  313,  note;  tele¬ 
graph  companies  under,  326 ;  reg¬ 
ulating  telegraph  lines,  Pennsyl¬ 
vania,  328-9  ;  regulating  telegraph 
companies,  Massachusetts,  336 ; 
requiring  underground  construc¬ 
tion  in  cities.  New  York,  374  ;  re¬ 
garding  powers  of  cities  in  rela¬ 
tion  to  water,  417 ;  authorizing 
pneumatic  tube  companies,  Mass¬ 
achusetts,  518;  regarding  regula¬ 
tion  of  gas  rates,  595 ;  providing 
for  appraisals,  Kansas,  620 ;  au¬ 
thorizing  gas  companies,  Pennsyl¬ 
vania,  649.  See  Legislature. 

Going  concern :  definition,  61 ;  in 
Minneapolis  electric  franchise, 
195 ;  Worcester  telephone,  258. 

Government  ownership  of  pneumatic 
tubes  for  distribution  of  mail : 
discussed,  513-16. 

Grace,  Wm.  R.,  mayor  of  New  York 
city :  veto  of  telephone  franchise, 
259. 

Graft.  See  Corruption. 

Grand  Rapids,  Mich.  :  car  lines  in, 
25  ;  electric  power  franchise,  172- 
5 ;  telephone  rates,  312 ;  night 
watch,  burglar  alarm  and  messen¬ 
ger  service  franchises,  350-3. 

Gray,  Prof.  John  II. :  investigation 


688 


INDEX  OF  VOLUME  I. 


of  New  Haven  water  company, 
409-17 ;  comment  on  Indiana¬ 
polis  water  supply,  422. 

Greene,  Prof.  Chas.  E. :  plans  for 
Ann  Arbor  water  system,  404. 

Gross  receipts :  division  of,  with 
city,  39,  58-9 ;  distinction  be¬ 

tween  tax  and  percentage  pay¬ 
ments,  47 ;  of  electrical  industry, 
146 ;  Jersey  City  electric,  152 ; 
Salt  Lake  City  electric,  159 ; 
Nashville  electric,  168 ;  Rockford, 
Ill.,  electric,  170 ;  Wichita,  Ivs., 
electric,  172 ;  Atlanta  electric, 
176 ;  Denver  electric,  187 ;  Min¬ 
neapolis  electric,  197 ;  St.  Paul 
heating  and  electric,  199  ;  Chicago 
electric,  201  ;  of  telephone  indus¬ 
try,  218 ;  franchise  to  highest 
bidder,  257 ;  Chicago  telephone, 
275 ;  percentage  to  be  spent  on 
maintenance  and  repairs,  284 ; 
Minneapolis  telephone,  316;  New 
York  city  signaling,  362,  365 ; 

Chicago  conduit  franchise,  387 ; 
Kansas  City  conduits,  390 ;  Kala¬ 
mazoo  central  heating  franchise, 
474  ;  Salt  Lake  City  central  heat¬ 
ing,  478 ;  South  Bend,  Ind.,  cen¬ 
tral  heating,  481  ;  Kansas  City, 
Mo.,  central  heating,  482  ;  Indian¬ 
apolis  central  heating,  486 ;  New 
York  central  heating,  490 ;  Nash¬ 
ville  steam  heating  and  conduits, 
494 ;  in  refrigeration  franchises, 
499,  500,  502,  506 ;  in  pneumatic 
tube  franchises,  520,  523  ;  in  com¬ 
pressed  air  franchises,  524,  527 ; 
of  New  York  gas  companies,  544, 
557  ;  provision  of  St.  Paul  charter, 
576  ;  in  Des  Moines  gas  franchise, 
582 ;  from  all  sources,  Nashville 
gas  company,  587 ;  Springfield, 
Ill.,  gas,  590 ;  Cleveland  natural 
gas,  600 ;  Kansas  City,  Mo.,  gas, 
615 ;  Salt  Lake  City  gas,  653 ; 
Chicago  natural  gas  company, 
settlement  of  tax,  660. 

Guaranty  fund.  See  Security  fund. 

Hall,  Henry  Noble  :  on  measured 
telephone  rates  in  New  Orleans, 
228. 


Harrisburg,  Pa.  :  pole  and  wire  reg¬ 
ulations,  331 ;  fire  alarm  fran¬ 
chise,  357. 

Heat :  supplied  by  electric  current,. 
137 ;  natural  gas  for  fuel  and 
heat,  Columbus,  604  ;  Wheeling, 
623 ;  natural  gas  for  heat,  In¬ 
dianapolis,  636 ;  Salt  Lake  City, 
651-3.  See  Gas,  Fuel,  Natural 
gas,  Central  heating  franchises 
(chapter  xv). 

Heating :  St.  Paul  electric,  198-200  ; 
central  heating  franchises,  chap, 
xv,  466-97.  See  Heat,  Gas,  Fuel. 

Heating  plants,  central :  in  Rock¬ 
ford,  Ill.,  170 ;  franchises  for, 
chap,  xv,  466-97.  See  Steam 
heating  and  power,  Central  heat¬ 
ing  franchises. 

Heat  units.  See  Heat  value. 

Heat  value :  relation  to  use  of  gas 
mantles,  536 ;  of  coal  gas  and 
water  gas,  586 ;  of  gas  in  New¬ 
port,  Ky.,  592 ;  of  natural  gas, 
605 ;  of  gas  in  Indianapolis,  644. 

Hesketh,  John:  on  efficiency  of  tele¬ 
phone  service  in  New  York  city, 
262. 

Hetch  Iletchy  Valley :  as  a  public 
water  reservoir,  426-31. 

History  of  public  utilities :  electric 
lignt,  heat  and  power,  135-6  ;  the 
telephone,  217—19 ;  the  telegraph, 
323-6 ;  central  heating,  466-7 ; 
pneumatic  tubes,  507-10;  artifi¬ 
cial  gas,  533-6  ;  natural  gas,  537- 
40 ;  gas  franchises  in  New  York 
city,  543—60.  See  Capitalization. 

Holding  companies.  See  Parent  and 
holding  companies. 

Hot  water:  from  springs,  Salt  Lake 
City  and  Boise,  449—50  ;  hot  water 
and  steam  for  central  heating, 
chap,  xv,  466-97. 

Hydrants :  Ann  Arbor  water  fran¬ 
chise,  405,  406 ;  in  New  Haven 
water  franchise,  410,  411;  to  be 
supplied  with  faucets,  419;  rates 
of  rental,  420;  location  of,  422; 
Denver,  442,  443,  444 ;  price 

charged  for,  447.  See  Water 
works  and  water  supply  fran¬ 
chises. 


INDEX  OF  VOLUME  I. 


689 


Identification  of  responsible  com¬ 
pany  :  general  discussion,  93-4 ; 
in  Grand  Rapids,  174 ;  in  Mass¬ 
achusetts,  254  ;  in  Chicago,  280 ; 
by  marking  telegraph  poles,  331, 
333,  335,  337 ;  by  tagging  cables 
in  municipal  conduits,  384,  385 ; 
manhole  covers  to  have  name  of 
owners,  521. 

Illinois :  terms  of  street  railway 
franchises  limited,  35. 

Illuminating  value.  See  Candle 
power. 

Improvements :  in  equipment  of 

public  utilities,  127-8 ;  adoption 
of,  and  readjustment  of  rates, 
158 ;  adoption  of,  required,  190, 
276 ;  in  telephony,  236 ;  increased 
rates  before  making,  460-1  ;  pro¬ 
vision  for  in  Philadelphia  gas 
lease,  570 ;  expenditures  required, 
Topeka  gas  franchise,  621  ;  rates 
to  be  lowered  when  improvements 
reduce  cost,  Indianapolis,  631. 

Indemnity :  in  Jersey  City  electric 
franchises,  151  ;  for  damages, 
152  ;  Salt  Lake  City  electric,  160  ; 
Duluth  electric,  162;  Denver  elec¬ 
tric,  184,  188;  Springfield,  Mass., 
telephone,  256 ;  Indianapolis  tele¬ 
phone,  305 ;  Toledo  telephone, 
315 ;  against  damages  by  tele¬ 
graph  operations,  327,  329,  346 ; 
in  messenger  and  signal  fran¬ 
chises,  353,  355,  357 ;  in  conduit 
franchises,  371  ;  bond  of  New  York 
conduit  company,  377,  378 ;  in 

Ann  Arbor  water  franchise,  407 ; 
bond  of  Los  Angeles  water  com¬ 
pany,  433 ;  Denver  water,  442 ; 
Butte  water,  446  ;  in  Long  Branch 
sewer  franchise,  457 ;  Detroit 
central  heating,  470 ;  Kalamazoo 
central  heating,  473 ;  New  York 
central  heating,  490  ;  Newark  cen¬ 
tral  heating,  494 ;  Baltimore  re¬ 
frigeration,  503 ;  St.  Louis  pneu¬ 
matic  tubes,  520 ;  Chicago  pneu¬ 
matic  tubes,  523 ;  oil  pipe  lines, 
Cleveland,  530  ;  bond  to  guarantee 
compliance  with  franchise,  Jer¬ 
sey  City,  531 ;  Somerville  gas, 
566 ;  in  Philadelphia  gas  lease, 


568 ;  bond  to  insure  compliance 
with  terms  of  grant,  Springfield, 
Ill.,  588 ;  bonds  for  protection 
against  damages  and  to  insure 
compliance  with  terms,  Newport, 
Ky.,  592 ;  Cincinnati  gas,  598 ; 
two  bonds  of  natural  gas  com¬ 
pany,  Columbus,  608 ;  in  Indian¬ 
apolis  gas  franchises,  634,  635, 

643.  See  Security  fund,  Penalty 
fund. 

Independent  telephone  systems :  in¬ 
crease  in  cost  of  service,  235-7 ; 
competition  versus  monopoly, 
237-42,  265 ;  growth  of  business, 
249  ;  use  of  flat  rates,  264-5  ;  use 
of  automatic  system,  266 ;  in  In¬ 
dianapolis,  303,  305 ;  local  and 
long  distance  Independent  fran¬ 
chises  in  the  Twin  Cities,  315-18. 

Indeterminate  franchise :  discussion 
of,  36,  37,  215 ;  to  prevent  over- 
capitalization,  117 ;  in  Massachu¬ 
setts,  257. 

Indiana :  municipal  corporations 

law,  417. 

Indianapolis :  competition  to  reduce 
rates,  303-8  ;  comparison  of  rates, 
312;  telegraph  franchises,  338; 
water  franchises  and  contracts, 
398,  417-23;  central  heating  fran¬ 
chises,  485-8 ;  old  gas  franchises, 
Indianapolis,  629-34 ;  natural  gas 
franchises,  635-40 ;  limited  profit, 
Consumers’  Gas  Company,  640-6. 

Injunction :  cause  of  delay  in  ac¬ 
cepting  franchise,  161 ;  city 
reserves  right  to  intervene  in 
suit,  522 ;  as  cause  of  delay  in 
construction,  Columbus,  608  ;  Kan¬ 
sas  City,  Mo.,  gas  franchise,  610, 
613. 

Injuries :  to  individuals  and  ways  of 
preventing  them,  chap,  iv,  73- 
100 ;  excavations  to  be  properly 
protected,  446,  455,  519.  See 

Accidents,  Damages,  Safety. 

Initiative :  in  Portland,  Ore.,  124, 
309  ;  Denver  gas  and  electric  fran¬ 
chise,  186. 

Inspection  :  of  meters,  85-7  ;  of  elec¬ 
tric  plant,  Minneapolis,  189 ;  of 
sewer  construction,  459  ;  of  street 


690 


INDEX  OF  VOLUME  I. 


construction  of  central  heating 
systems,  469,  494,  496 ;  of  street 
construction  of  pneumatic  tube 
system,  520 ;  of  street  work  by 
New  York  Gas  Light  Company, 
547 ;  of  meters,  by  city,  Philadel¬ 
phia,  571 ;  Minneapolis,  574 ; 
Saginaw,  586 ;  Cincinnati,  598  ;  of 
gas  and  meters,  Kansas  City,  Mo., 
612,  613 ;  of  appliances  and  ap¬ 
paratus,  633 ;  company  to  pay  for 
inspection  of  meters  and  quality 
of  gas,  634 ;  of  gas  plant  and 
property,  642,  645  ;  of  Detroit  gas 
meters,  657.  See  Construction, 
Supervision. 

Inspectors.  See  Inspection. 

Instruments.  See  Equipment. 

Insulation :  of  central  heating  con¬ 
duits,  488.  See  Wires. 

Interurban :  street  railway  ter¬ 

minals,  69 ;  electrical  industry, 
142,  147,  149 ;  nature  of  tele¬ 

phone  and  telegraph  business, 
326,  327.  See  Suburban  districts. 

Inventions.  See  Improvements. 

Inventory :  of  plant  and  fixtures  by 
Kansas  City,  Missouri,  gas  com¬ 
pany  in  case  of  purchase  by  city, 
612. 

Investment :  80  cent  gas  case,  43-5  ; 
percentage  of  total,  to  be  paid  to 
city,  494.  See  Capitalization. 

Irrigation :  relation  to  city  water 
supply,  427-9 ;  ditches  used  for 
municipal  supply,  431. 

Jersey  City  :  electric  franchises, 
150-2 ;  pole  and  wire  regulations, 
334-5 ;  oil  pipe  line  franchise, 
531. 

Johnson,  Tom  L. :  quoted  on  fran¬ 
chises,  28. 

Johnstown,  Pa. :  central  heating 
plant,  467-9. 

Joint  use  of  fixtures :  ownership, 
137-8;  in  Salt  Lake  City  electric 
franchise,  156 ;  Duluth  electric, 
161  ;  Richmond  electric,  164  ; 
Nashville  electric,  166;  Grand 
Rapids  electric,  174  ;  Atlanta 
electric,  177 ;  Seattle  electric, 
181 ;  St.  Paul  electric,  200 ;  Buf¬ 


falo  electric,  with  division  of  ter¬ 
ritory,  207 ;  telegraph,  328,  329 ; 
Newark  telegraph,  332 ;  Chicago 
telegraph,  344  ;  St.  Louis  con¬ 
duits,  371 ;  lease  of  conduit  space 
forbidden,  Nashville,  374 ;  Troy 
conduits,  387 ;  Buffalo  conduits, 
388 ;  Kansas  City,  Mo.,  conduits, 
390 ;  Minneapolis  conduits,  391 ; 
Duluth  conduits,  392. 

Judicial  interpretation :  modifica¬ 
tion  of  franchises  by,  21. 

Judiciary :  influencing  the,  112-14. 
See  Court,  United  States  Supreme 
court. 

Jury;  as  board  of  appraisal,  253. 

Jury-fixing:  means  of  preventing, 
113. 

Kalamazoo  :  central  heating  fran¬ 
chise,  473-4. 

Kansas ;  provision  for  electric  com¬ 
panies  in  general  law,  171. 

Kansas  City,  Mo. :  electrical  clock 
franchise,  355 ;  conduit  franchise, 
389—90 ;  central  heating  fran¬ 
chises,  481-3 ;  refrigeration  fran¬ 
chise,  504-5  ;  gas  franchises,  609- 
18. 

Knoxville ;  regulation  of  water 
rates,  448-9. 

Labor.  See  Employees. 

La  Crosse,  Wis. :  heating,  ventilat¬ 
ing  and  regulating  system  in  con¬ 
nection  with  electric  plant,  496. 

Lamp  posts :  maximum  charges  for 
public  lighting,  553.  See  Equip¬ 
ment,  Public  lighting. 

Lancaster,  Pa. :  pole  and  wire  or¬ 
dinance,  331. 

Lease  :  of  Los  Angeles  water  system, 
431-6 ;  of  South  Denver  water 
plant,  440 ;  of  Philadelphia  gas 
works,  556-72 ;  of  Toledo  muni¬ 
cipal  gas  plant,  648-9.  See 
Patents,  Contracts,  License  fees. 

Legislature :  franchises  granted  by, 
10 ;  electric  franchises  granted 
by,  142  ;  Baltimore  conduits,  382  ; 
New  Haven  water  franchise,  409, 
410,  414 ;  New  Orleans  water 

franchise,  437 ;  New  York  pneu- 


t 


INDEX  OF 

matic  tubes,  517 ;  gas  franchises 
of  New  York,  544,  546  ;  549,  550, 
556 ;  gas  franchises  of  Massachu¬ 
setts,  560-4 ;  gas  company  chart¬ 
ered  by  state  of  Illinois,  588; 
gas  charters  in  Maryland,  623,  624  ; 
gas  charters  by  Pennsylvania 
legislature,  649 ;  act  of  Illinois 
legislature  authorizng  Chicago  to 
regulate  rates,  659.  See  General 
franchises,  General  laws. 

Liability  for  damages.  See  Dam¬ 
ages. 

License  fees :  for  telegraph  lines, 
328,  331,  335.  See  Patents, 

Equipment,  Taxes,  Compensation. 

Listings :  in  telephone  directory, 

232,  322 ;  by  Chicago  telephone 
company,  279.  See  Directory. 

Local  control.  See  Municipal  con¬ 
trol. 

Location  of  works :  public  approval 
required,  76 ;  subject  to  approval 
of  council,  Salt  Lake  City  gas 
franchise,  651.  See  Nuisances, 
Poles,  Fixtures,  Locations  in  the 
street's. 

Locations  in  the  streets :  control  by 
city,  52,  96,  155,  198,  215;  reg¬ 
ulated  by  local  authorities,  Mass¬ 
achusetts  253,  257 ;  Springfield, 

Mass.,  telephone,  256,  257 ;  gov¬ 

erned  by  general  law  in  Pennsyl¬ 
vania,  327 ;  provisions  in  tele¬ 
graph  franchises,  328,  329,  333, 

334,  336,  337,  343  ;  forfeiture  for 
non-user,  337 ;  annual  report  of, 
346  ;  council  to  be  petitioned  for, 
350 ;  written  permission  of  city 

engineer  required,  355 ;  streets 
named  in  grant,  Denver,  356  ;  for 
gas  mains,  not  revocable  by  local 
authorities  in  Massachusetts, 
561 ;  municipalities  not  com¬ 
pelled  to  grant,  562.  See  Fix¬ 

tures,  Poles,  Wires,  Maps,  Con¬ 
duits,  Underground  construction. 

Lockport,  N.  Y. :  a  100-year  fran¬ 
chise  for  heating,  refrigerating, 
gas,  electric  light  and  power,  495. 

Long  Branch,  N.  J. :  sewer  fran¬ 
chise,  455-7. 


VOLUME  I.  691 

Long  distance  telephone  calls :  in 
New  Orleans,  287. 

Long  distance  telephone  lines :  im¬ 
portance  of  connections  with, 
230,  319 ;  Bell  companies’  advan¬ 
tage,  265 ;  connections  required, 
268 ;  connection  without  discrim¬ 
ination,  Indianapolis,  306,  307 ; 

connection  with,  Toledo,  315.  See 
Pay  stations. 

Long  Island  City.  See  New  York 
city. 

Los  Angeles ;  water  franchise  and 
new  water  project,  431-6. 

Losses :  from  dishonesty  of  em¬ 
ployees,  120. 

Mackay  Companies,  The :  statistics 
of,  325-6. 

Mail :  cars  for,  68 ;  transmission  by 
pneumatic  tubes,  507-16,  520-3. 

Mains.  See  Gas  mains.  Water 
mains,  Water  conduits,  Conduits, 
Wires,  Pipes,  Underground  con¬ 
struction. 

Maltbie,  Milo  R. :  Public  Service 
Commissioner,  on  uniform  ac¬ 
counts,  211. 

Manhattan  Island.  See  New  York 
city. 

Manholes :  charge  for,  500.  See 
Identification  of  responsible  com¬ 
pany,  Conduits,  Underground  con¬ 
struction. 

Mantles  for  gas  lighting :  value  of, 
536,  538. 

Maps  required  :  Salt  Lake  City  elec¬ 
tric  franchise,  154 ;  Nashville 
electric,  165 ;  Grand  Rapids  elec¬ 
tric  power,  173;  Columbus  elec¬ 
tric,  178 ;  Minneapolis  electric, 
189 ;  St.  Paul  electric  and  heat¬ 
ing,  198-9  ;  maps  of  telephone  con¬ 
duits  to  be  filed  annually,  New 
York,  270 ;  of  telephone  conduits 
and  manholes,  Chicago,  280 ;  be¬ 
fore  beginning  construction,  Toledo 
telephone,  313 ;  of  telegraph 
poles  and  wires  required,  Newark, 
333  ;  Somerville  telegraph,  336  ;  of 
messenger  and  signal  system,  354, 
363 ;  of  conduit  locations,  374, 
388,  396 ;  of  sewer  locations, 


692 


INDEX  OF  VOLUME  I. 


Austin,  Tex.,  458  ;  of  underground 
construction  for  central  heating, 
475,  480,  482,  491  ;  of  refrigera¬ 
tion  system,  New  York  city,  501  ; 
of  pneumatic  tube  system,  Chicago, 
521 ;  of  street  construction  re¬ 
quired,  Springfield,  Mass.,  gas 
company,  565 ;  must  he  revised 
and  brought  up  to  date  every 
year,  St.  Paul,  576 ;  of  proposed 
excavations,  Columbus,  606  ;  of  lo¬ 
cation  of  mains,  Baltimore,  624 ; 
of  location  of  gas  pipes,  Indian¬ 
apolis,  638,  643. 

Maryland :  laws  providing  for  con¬ 
duits  in  Baltimore,  382-4. 

Massachusetts :  indeterminate  fran¬ 
chises,  36 ;  surplus  profits  of 
public  service  corporations,  56 ; 
division  of  street  railway  profits 
with  city,  58 ;  street  railway 
amusement  parks,  66 ;  profits 
from  sale  of  by-products  of  public 
utilities,  68 ;  electric  light  rates, 
83-5  ;  limitation  of  bond  issues  by 
utility  companies,  116 ;  develop¬ 
ment  of  water  power  for  generat¬ 
ing  electrical  current,  147-8 ;  gas 
and  electric  lighting,  211-12 ; 
State  control  of  the  telephone, 
252-8 ;  general  law  governing 
telegraph  companies,  336. 

Massachusetts  Board  of  Gas  and 
Electric  Light  Commissioners :  in¬ 
quiry  into  rates  for  electric  cur¬ 
rent,  83-5  ;  report  on  water  power 
for  electricity,  147-8 ;  super¬ 
visory  powers,  211-2. 

Maximum  rates :  fixed  in  fran¬ 
chise,  41 ;  discussion  of  necessity 
for,  129 ;  Salt  Lake  City  electric, 
153;  Duluth  electric,  162-3; 
Nashville  electric,  167 ;  Rockford, 
Ill.,  electric,  170 ;  Wichita,  Ks., 
electric,  172 ;  Grand  Rapids  elec¬ 
tric,  174  ;  Atlanta  electric,  177  ; 
Columbus  electric,  178 ;  Seattle 
electric,  182 ;  Denver  electric, 
187  ;  Minneapolis  electric,  193-4  ; 
St.  Paul  electric,  199-200 ;  Chi¬ 
cago  electric,  202 ;  Buffalo  elec¬ 
tric  power,  209 ;  New  York  city 
telephone,  270 ;  schedule  of  Chi¬ 


cago  telephone  company,  276-9 ; 
New  Orleans  telephone,  288 ; 
Washington,  D.  C.,  telephone, 
291  ;  Ann  Arbor,  Mich.,  telephone, 
319 ;  Chicago  telegraph,  adjusted 
every  three  years,  345-6 ;  for 
messenger  and  signal  service,  353, 
363 ;  in  proposed  conduit  fran¬ 
chise,  Washington,  D.  C.,  395 ; 

Atlantic  City  sewerage,  464-5 ; 
Topeka  council  may  fix  rate  for 
artificial  gas  based  on  net  earn¬ 
ings,  619 ;  for  gas  in  Salt  Lake 
City,  651. 

Measured  rates ;  Salt  Lake  City, 
electric,  158,  159 ;  Denver  elec¬ 
tric,  185-7 ;  Minneapolis  electric, 
194  ;  for  telephones,  228,  234 ; 

versus  flat  rates,  242-5 ;  tele¬ 
phone,  between  districts  in  New 
York  city,  271 ;  of  Chicago  tele¬ 
phone  company,  276-8 ;  not 
recommended,  New  Orleans  tele¬ 
phone,  286,  288 ;  Washington, 

D.  C.,  telephone,  289 ;  discussion 
of.  321  ;  for  Ann  Arbor  water  sup¬ 
ply,  408 ;  New  Haven  water, 
414  ;  water,  in  Birmingham,  Ala., 
448 ;  for  heat  depending  on  price 
of  coal,  473 ;  for  central  heating, 
478 ;  alternative  of  flat  or  meas¬ 
ured  rates,  637.  See  Meters,  Flat 
rates. 

Merchants’  Association  of  New 
York :  on  telephone  competition, 
239-40  ;  investigation  of  telephone 
rates,  260-2. 

Merger.  See  Monopoly,  Combina¬ 
tion,  Consolidation. 

Merit  system :  suggested  for  em¬ 
ployees  of  public  service  corpora¬ 
tions,  93 ;  application  to  tele¬ 
phone  employees,  255. 

Messenger  and  signal  franchises : 
chapter  xi,  347-66. 

Meters :  inspection  of,  85-7 ;  tele¬ 
phone,  86,  227-9,  250 ;  owner¬ 

ship  of,  138 ;  Minneapolis  elec¬ 
tric,  194 ;  Chicago  telephone, 
278  ;  Ann  Arbor  water,  408  ;  New 
Haven  water,  414 ;  Denver 
water  company  given  right  to 
compel  use,  442 ;  to  show  amount 


INDEX  OF  VOLUME  I. 


693 


of  steam  consumed,  469 ;  inspec¬ 
tion  of  central  heating  meters, 
472  ;  use  of,  optional  with  central 
heating  company,  488 ;  for  gas, 
537  ;  tests  of  meters  under  Phila¬ 
delphia  gas  lease,  571 ;  tests  of 
gas  meters,  Minneapolis,  574 ;  to 
be  furnished  by  company,  Des 
Moines,  580 ;  testing  gas  meters, 
Saginaw,  586 ;  to  be  tested  and 
sealed,  598 ;  furnished  by  natural 
gas  company,  Cleveland,  600 ;  fur¬ 
nished  free  by  artificial  gas  com¬ 
pany,  Topeka,  621  ;  furnished  and 
maintained  by  gas  company,  In¬ 
dianapolis,  630 ;  tested  at  cost  of 
city,  634,  645 ;  deposit'  required, 
644  ;  Toledo  gas,  648  ;  Detroit  gas, 
657,  659.  See  Measured  rates, 

Inspection,  Deposits,  Minimum 
charge. 

Michigan :  term  of  franchises 

limited,  35 ;  indeterminate  fran¬ 
chise  provided  for,  37 ;  life  of 
corporations,  limited,  407. 

Milwaukee :  free  telegraph  service, 
341-2. 

Mineral  baths :  franchise,  Salt  Lake 
City,  449. 

Minimum  charge :  a  uniform  rate 
without,  53-4 ;  Salt  Lake  City 
electric,  153,  158 ;  Rockford,  III., 
electric,  170 ;  Grand  Rapids  elec¬ 
tric,  174  ;  Denver  electric,  186-7  ; 
Minneapolis  electric,  194 ;  St. 
Paul  electric,  200 ;  Chicago  elec¬ 
tric,  202 ;  Buffalo  electric  power, 
209 ;  for  gas  service  in  St.  Paul, 
577 ;  for  gas  service  in  Kansas 
City,  Mo.,  614 ;  for  natural  gas 
in  Toledo,  649 ;  for  gas  in  Salt 
Lake  City,  652,  653.  See  Rates, 

Minimum  rate :  Buffalo  electric 
power,  209.  See  Minimum  charge. 

Minneapolis  :  electric  franchise,  188— 
98 ;  telephone  franchises,  315-8  ; 
telegraph  franchise,  341  ;  fran¬ 
chise  for  telegraph,  burglar,  police 
and  fire  alarm  system,  362 ;  con¬ 
duit  franchise,  390-1 ;  gas  fran¬ 
chise,  572-5. 

Minnesota :  electric  heating  in,  146. 


Model  franchise :  water,  402-3. 

Modification  of  franchises :  by  ac¬ 
quiescence,  15 ;  by  consolidation, 
17  ;  by  judicial  interpretation,  21  ; 
with  change  of  motive  power,  22  ; 
by  operating  agreements,  23  ;  right 
reserved  to  city,  355.  See  Amend¬ 
ment'. 

Monopoly :  established  by  franchise, 
29 ;  advantages  of,  30-33 ;  mo¬ 
nopoly  profits,  and  ways  of  limit¬ 
ing  them,  chapter  iii,  34-72  ;  com¬ 
petition  versus  monopoly  in  pub¬ 
lic  utility  enterprises,  123-4 ; 
limited  by  indirect  competition, 
124-5 ;  strengthened  by  alliances, 
126 ;  advantages  limited  by  in¬ 
crease  in  cost  of  service,  126-7 ; 
influence  of  the  junk  heap  on 
monopoly  advantages,  127-8 ; 
profits  diminished  by  depreciated 
currency,  129 ;  fundamental  prin¬ 
ciples  relating  to  public  utilities, 
130-1 ;  in  the  electrical  industry, 
139-40 ;  Chicago  electric,  200-6 ; 
in  the  telephone  business,  230 ; 
competition  versus  monopoly  in 
telephones,  237-42,  245,  251,  321 ; 
without  conditions.  New  York 
City,  258-62  ;  conditioned  by  ordi¬ 
nance  fixing  rates,  Chicago,  273- 
85  ;  under  Federal  laws,  Washing¬ 
ton,  289-303 ;  in  the  telegraph 
business,  323-6 ;  electrical  con¬ 
duits,  New  York  City,  374-81  ;  in 
New  Haven  water  supply,  409- 
17 ;  San  Francisco  water,  425 ; 
claimed  by  American  Pneumatic 
Service  Company,  511-12;  in  Min¬ 
neapolis  gas  franchises,  572-6. 

Monopoly  profits  and  ways  of  lim¬ 
iting  them,  chapter  iii,  34-72. 

Moody,  Justice,  Wm.  H.  :  on  regula¬ 
tion  of  public  service  corporations, 
449. 

Moody’s  Manual :  telephone  statis¬ 
tics  from,  222. 

Mortgage :  on  franchise,  183.  See 
Assignment  of  franchise. 

Motive  power :  consents  for  changes 
of,  22. 

Municipal  control :  of  electric  sys¬ 
tem,  138,  140-2 ;  of  telegraph 


694 


INDEX  OF  VOLUME  I. 


structures  in  the  streets,  327-8 ; 
of  construction  and  use  of  con¬ 
duits,  369.  See  Streets,  Inspec¬ 
tion,  Supervision. 

Municipal  corruption.  See  Corrup¬ 
tion. 

Municipal  ownership  and  operation 
of  public  utilities :  demand  for, 
6-7 ;  not  for  relief  of  tax-payers, 
131 ;  in  the  electrical  industry, 
140 ;  reservation  of  right  to  erect 
and  maintain  poles  for  street 
lighting,  Salt  Lake  City,  153 ; 
reservation  of  right  to  maintain 
public  lighting  plant  and  appli¬ 
ances,  Cedar  Rapids,  175;  reserva¬ 
tion  of  right  to  maintain  plant  for 
public  and  private  lighting,  Min¬ 
neapolis,  197 ;  ownership  of  con¬ 
duits  and  street  railway  tracks  by 
city,  369-70;  general  systems  of 
municipal  conduits  in  Baltimore, 
Erie  and  New  Britain,  382-6 ; 
conduits  for  municipal  purposes, 
Chicago,  387 ;  compared  with  pri¬ 
vate  ownership  of  water  fran¬ 
chises,  397-9 ;  demand  for  muni¬ 
cipal  ownership  of  water  supply, 
New  Haven,  412 ;  provided  for 
under  Indiana  general  laws,  417 ; 
San  Francisco,  attempt  to  secure, 
425-31 ;  Los  Angeles  water,  431, 
434-6  ;  in  New  Orleans  436,  439  ; 
of  water  system  in  Denver,  440 ; 
New  Orleans  sewers,  455 ;  of  gas 
plant  in  Philadelphia,  566-72 ; 
city  reserves  right  in  Kansas  City, 
Mo.,  gas  franchise,  617  ;  Wheeling 
gas  plant,  622 ;  of  natural  gas 
distributing  system,  Toledo,  648. 
See  Purchase,  Purchase  price,  Res¬ 
ervation  of  right. 

Music  :  proposed  franchise  for  trans¬ 
mission  by  electricity,  New  York 
City,  364. 

Mutual  telephone  systems.  See  Tele¬ 
phone. 

Nashville:  purchase  clause  of 

street  railway  settlement,  61  ;  elec¬ 
tric  franchises,  165-9 ;  telegraph 
franchises,  342—3 ;  messenger 
franchise,  361  ;  plan  of  conduit 


construction  required,  373 ;  steam 
heating  and  conduits  combined, 
492-3 ;  gas  franchise,  587. 

National  Civic  Federation :  quoted, 
29 ;  on  electric  franchises  in  Chi¬ 
cago,  143,  200 ;  Atlanta  electric 
franchise,  176-7 ;  New  Haven 
water  franchises,  409-17 ;  Indi¬ 
anapolis  water  system,  417,  423 ; 
Philadelphia  gas  lease,  566-72 ; 
Wheeling  gas  franchises,  621-3. 

National  Electric  Light  Associa¬ 
tion  :  attitude  toward  franchises, 
28 

National  Municipal  League :  rec¬ 
omends  time  limit  for  franchises, 
35. 

Natural  gas.  See  Gas,  natural. 

Neighborhood  exchanges :  usefulness 
of,  231,  321  ;  rates  charged  by 
Chicago  telephone  company,  277- 
8.  See  Rates,  Maximum  rates, 
Flat  rates. 

Net  earnings  :  division  with  city,  39, 
284  ;  Chicago  plan,  58-9  ;  Wichita, 
Ks.,  electric,  171-2  ;  of  New  York 
Telephone  company,  261  ;  Chi¬ 
cago  telephone,  284  ;  division  with 
city  of  excess  over  10  per  cent., 
376,  378,  379,  382;  division  with 
employees,  423  ;  Now  York  central 
heating,  492 ;  division  with  con¬ 
sumers  of  gas  company,  550 ;  To¬ 
peka  natural  gas,  619 ;  Baltimore 
natural  gas,  625.  See  Compensa¬ 
tion  for  franchises. 

Newark,  N.  J.  :  telegraph  franchises, 
331-4 ;  central  heating  franchise, 
494. 

New  Britain,  Cf. :  municipal  con¬ 
duits,  386.  4 

New  Haven :  private  water  works, 
398,  409-17. 

New  Jersey  :  limited  term  franchises 
recommended  by  state  commission, 
35 ;  combination  in  public  utili¬ 
ties,  140 ;  property  owners’  con¬ 
sents,  334. 

New  Orleans :  telephone  registering 
in,  228  ;  telephone  report  of  Board 
of  Trade,  241  ;  telephone  contract 
dominated  by  business  interests, 
2S5-9  ;  water  system,  398  ;  private 


V 


INDEX  OF 

-water  franchise  forfeited,  436-40 ; 
sewer  franchises  and  municipal 
ownership,  454. 

Newport,  Ky. :  telegraph  franchise, 
340-1  ;  gas  franchises,  591-3. 

Newspapers :  delivery  by  pneumatic 
tubes,  517-18. 

New  York  City :  public  utilities,  1 ; 
perpetual  franchises,  6 ;  city  bu¬ 
reau  of  franchises,  10 ;  free  light¬ 
ing  on  Staten  Island,  19  ;  consoli¬ 
dation  of  public  utilities,  29  ;  limi¬ 
tation  of  franchise  term  in  city 
charter,  35 ;  sale  of  street  rail¬ 
way  franchises,  38-40  ;  regulation 
of  public  utility  rates,  42  ;  eighty- 
cent  gas  case,  43-5 ;  trick  in 
Flushing  electric  light  franchise, 
62 ;  value  of  perpetual  franchises 
on  Manhattan  Island,  64  ;  electri¬ 
cal  conduits,  66,  381-2 ;  property 
owners’  consent  at  City  Island, 
75;  location  of  works,  76;  leases 
and  transfers  of  franchises,  93- 
4 ;  horse  cars,  97 ;  franchises  se¬ 
cured  through  corruption,  105 ; 
competition  of  gas  companies, 
124 ;  combination  in  electrical 
.business,  140;  electric  light  fran¬ 
chises,  209-11 ;  telephone  register¬ 
ing,  229 ;  telephone  monopoly, 
258-62 ;  stringent  conditions  pro¬ 
posed  for  a  competing  company, 
262-73 ;  signal  franchises,  357, 
358 ;  messenger,  burglar  and  fire 
alarm  franchise,  362-3 ;  franchise 
for  electrical  transmission  of 
music,  364-6 ;  central  heating 
franchises,  489-92 ;  refrigeration 
franchises,  499-502 ;  pneumatic 
tube  franchises,  516-18  ;  gas  fran¬ 
chises  in  old  New  York,  Long 
Island  City  and  Staten  Island, 
543-60. 

New  York  State :  property  owners’ 
consents  required  for  street  rail¬ 
ways,  11 ;  trackage  rights  on 
street  railways,  22 ;  percentage  of 
gross  receipts  paid  by  street  rail¬ 
way  companies,  39 ;  appeal  to 
court  on  refusal  of  consents,  75 ; 
general  grant  to  electric  power 
company,  207 ;  laws  requiring 


VOLUME  I.  695 

underground  construction  for 
wires,  374. 

Niagara  Falls :  electric  power  from, 
206-9. 

Nichols,  Harry  P.  :  reports  to  New 
York  Board  of  Estimate  on  pro¬ 
posed  competing  telephone  fran¬ 
chise,  262-6 ;  report  on  music 
franchise,  364-5. 

Nickel  prepayment  telephones :  of 
Chicago  telephone  company,  277. 
See  Rates. 

Night  watch.  See  Messenger  and 
Signal  franchises. 

Non-user  of  franchises  :  effect  of,  12  ; 
in  proposed  Atlantic  telephone 
company  franchise,  271  ;  in  Nash¬ 
ville  telegraph  franchise,  343 ;  in 
Chicago  telegraph  franchise,  347. 
See  Construction,  Acceptance,  For¬ 
feiture. 

Nuisances :  elimination  of,  78-9 ; 
Mayor’s  suggestions,  Jersey  City, 
152 ;  gas  plants,  New  York  City, 
545,  551,  553.  See  Location  of 
works. 

Obligations  :  imposed  in  franchise 
grants,  49-50 ;  imposed  upon  con¬ 
sumers,  98-9.  See  Exemption. 

Obstructions  in  the  streets.  See 
Excavations,  Construction,  Under¬ 
ground  construction,  Fixtures  in 
the  streets. 

Ohio :  property  owners’  consents, 
12 ;  limitation  of  franchise  term,’ 
35  ;  property  owners’  consent  law, 
76 ;  telephone  franchises,  313 
note. 

Oil  pipe  line  franchises ;  chapter 
xviii,  529-32. 

Oliphant,  F.  H. :  quotation  relative 
to  natural  gas,  538. 

Omaha  :  water  works,  398. 

“  Open  town  ”  :  relation  to  public 
utility  profits.  104.  See  Corrup¬ 
tion,  Saloons. 

Operation :  time  for  beginning  to 
furnish  service,  503.  See  Con¬ 
struction,  Penalty. 

Option.  See  Purchase. 

Oregon :  law  prohibiting  free  passes, 
107. 


696 


INDEX  OF  VOLUME  I. 


Over-capitalization :  discussion  of, 

114-18.  See  Capitalization,  Bonds. 

Parcel  delivery  :  by  means  of  pneu¬ 
matic  tubes  in  New  York  City, 
517-18. 

Parent  and  holding  companies  :  con¬ 
tracts  of,  56-7 ;  in  the  electrical 
industry,  138-9 ;  the  American 
Telephone  and  Telegraph  Com¬ 
pany  and  subsidiaries,  221-6  ;  con¬ 
tracts  with  subsidiary  companies 
in  Washington,  D.  C.,  293-300 ; 

telegraph,  325 ;  American  Pneu¬ 
matic  Service  company,  511-13, 
518. 

Partnership :  between  city  and  pub¬ 
lic  service  corporation,  proposed 
in  Baltimore,  623-8. 

Party  line  telephones :  reduced  cost, 
231  ;  rates,  New  York  City,  270 ; 
rates,  Chicago,  276-7 ;  cause  of 
poor  service,  New  Orleans,  286, 
288 ;  rates  in  Washington,  D.  C., 
289,  291 ;  in  Minneapolis  and  St. 
Paul,  318. 

Passes.  See  Corruption. 

Paterson,  N.  J.  :  private  ownership 
of  water  works,  398. 

Patronage :  distribution  of,  by  pub¬ 
lic  service  corporations,  108—10. 
See  Corruption. 

Patents  :  telephone,  221-6,  251 ;  city 
protected  against  suits  for  in- 

,  fringement,  377 ;  for  pneumatic 
tubes,  511  ;  city  not  liable  for  in¬ 
fringement,  Indianapolis  gas  fran¬ 
chise,  630. 

Paving  obligations :  in  Philadelphia, 
49-50  ;  pipes  to  be  laid  before  pave¬ 
ments,  80,  281,  395,  583,  588,  593, 
613,  647.  See  Restoring  pave¬ 

ments,  Underground  construction. 

Pay  stations  :  extend  benefits  of  tele¬ 
phone,  230  ;  in  depots,  247  ;  rates, 
Chicago  telephone  franchise,  277- 
8 ;  Washington,  D.  C.,  telephone, 
302.  See  Rates. 

Peak  loads :  discussed,  145-6.  See 
Equipment. 

Penalty :  for  delay  in  payment  of 
bills,  174,  179,  180,  461,  493,  549, 
554,  577,  579,  581,  586,  590,  595, 


608,  613,  614,  637,  649,  657,  659; 
for  neglect'  to  give  service,  180 ; 
forfeit  of  $50,000  for  failure  t'o 
complete  pipes  from  natural  gas 
fields,  Columbus,  608 ;  for  remov¬ 
ing  meter  except  for  repairs,  659. 
See  Penalty  fund,  Indemnity,  Se¬ 
curity  fund,  Forfeiture,  Discounts. 

Penalty  fund  :  in  Kansas  City,  Mo., 
refrigeration  franchise,  505 ;  in 
Richmond,  Va.,  franchise  for  using 
surplus  water  for  power,  527 ; 
provision  for  bond  in  Philadelphia 
gas  lease,  568,  571 ;  in  Indianapo¬ 
lis  for  failure  of  gas  company  to 
restore  streets,  644.  See  Indem¬ 
nity,  Security  fund. 

Pennsylvania :  Supreme  Court  decis¬ 
ion  on  rates,  82 ;  regulation  of 
telegraph  lines,  328-9. 

Perpetual  franchises :  unused,  on 
Manhattan  Island,  6;  value  of, 
64  ;  New  York  City  electric,  210 ; 
discussion  of,  215 ;  Toledo  tele¬ 
phone,  313 ;  New  Haven  water, 
414-5 ;  unless  revoked  for  failure 
of  company  to  fulfil  conditions 
imposed,  Butte  water,  446 ;  of 
New  York  gas  companies,  548- 
59 ;  St.  Paul  gas  and  electric, 
579. 

Philadelphia :  paving  and  street 

cleaning  by  street  railway  com¬ 
panies,  49  ;  conduit  rentals,  380  ; 
pneumatic  tubes,  507-11  ;  muni¬ 
cipal  gas  works,  566-72. 

Philippine  Islands :  indeterminate 
franchise  in,  36. 

Pipe  lines  :  for  natural  gas,  625  ;  oil 
pipe  line  franchises,  chapter  xviii, 
529-32.  See  Pipes,  Conduits,  Gas 
mains.  Water  conduits,  Water 
mains. 

Pipes :  permit  for  removal,  Duluth 
central  heating  franchise,  489  ; 
regulations  for  New  York  central 
heating,  489-90 ;  fuel  oil,  Dallas, 
532 ;  classification  of  Indianapolis 
gas  pipes,  638-9 ;  must  be  relaid 
to  suit  changes  in  grade  of 
streets,  Indianapolis,  644 ;  coun¬ 
cil  may  require  renewal,  Erie, 
650.  See  Conduit's,  Water  con- 


INDEX  OF 

duits,  Gas  mains,  Water  mains, 
Pipe  lines. 

Pitney,  Hon.  Mahlon :  quoted  in  re¬ 
gard  to  franchise  obligations  in 
Washington,  D.  C.,  292. 

Plans.  See  Maps. 

Plant :  definition  of,  196,  281 ;  lo¬ 
cation  of,  546.  See  Location  of 
works,  Nuisances. 

Plats.  See  Maps. 

Pneumatic  tubes  and  the  franchises 
under  which  they  are  operated, 
chapter  xvii,  507-28. 

Poles :  theory  of  pole-tax,  47  ;  own¬ 
ership  of,  137-8  ;  location  of,  Jer¬ 
sey  City,  150  ;  size  and  special  tax 
upon,  Salt  Lake  City,  153-6 ; 
painting,  Duluth,  161-2 ;  in  Rich¬ 
mond,  Va.,  164  ;  in  Nashville,  165- 
7 ;  in  Rockford,  Ill.,  169 ;  in 
Grand  Rapids,  173-4 ;  in  Cedar 
Rapids,  la.,  175 ;  in  Columbus, 
178;  in  Minneapolis,  188-9;  in  St. 
Paul,  198 ;  in  Chicago,  204 ;  in 
Buffalo,  207 ;  ownership  of  tele¬ 
phone,  249 ;  must  be  placed  in 
alleys,  Chicago  telephone,  281  ; 
telephone,  Washington,  D.  C.,  291  ; 
of  municipal  fire  alarm  system, 
Indianapolis,  304  ;  position  of,  To¬ 
ledo,  314  ;  size  of,  in  Minneapolis, 
316 ;  of  the  Grand  Rapids  Mes¬ 
senger  &  Packet  Company,  350 ; 
for  electric  clock  system,  Kansas 
City,  Mo.,  355  ;  for  fire  alarm  sys¬ 
tem,  Harrisburg,  357 ;  terminal 
and  distributing  poles  for  munici¬ 
pal  conduit's,  385.  See  Telegraph 
poles,  Wires,  Fixtures  in  the 
streets,  Pole-tax,  Taxes,  License 
fees. 

Pole-tax :  provision  for,  in  franchise, 
48 ;  uniformity  prescribed,  154 ; 
on  telegraph  poles,  328,  331,  335, 
338,  339. 

Police  alarm.  See  Messenger  and 
Signal  franchises. 

Portland,  Ore. :  telephone  competi¬ 
tion  in,  124;  competition  secured 
through  the  Initiative,  308-12 ; 
telegraph  regulations,  343 ;  mes¬ 
senger  and  delivery  franchise, 
358-9. 


VOLUME  I.  697 

Porto  Rico :  indeterminate  franchise 
in,  36. 

Postal  Telegraph  Cable  Company. 
See  Mackay  companies,  The. 

Power :  development  of,  147-9 ; 

rates,  Grand  Rapids,  electric,  174; 
rates,  Seattle  electric,  183 ;  rates, 
Chicago  electric,  202 ;  rates,  Buf¬ 
falo  electric,  208-9 ;  franchise  for 
heat  and  power,  479 ;  generated 
by  waste  water  from  pumping 
station,  525.  See  Electric  light, 
heat  and  power. 

Pressure:  gas  regulators,  88;  water, 
418,  439,  443,  445  ;  steam  in  cen¬ 
tral  heating,  472  ;  test  of  refriger¬ 
ation  pipes,  500 ;  of  pneumatic 
tubes,  521  ;  of  gas,  537,  539,  541, 
556,  575,  586,  592,  601,  604,  607, 
613;  of  natural  gas,  Indianapolis, 
633 ;  gauges  to  be  furnished  by 
gas  company,  636,  637  ;  maximum 
and  minimum  prescribed,  639  ;  De¬ 
troit  gas  system,  657. 

Private  branch  exchanges :  use  of, 
231  ;  rates,  270  ;  in  Chicago,  276  ; 
in  New  Orleans,  288.  See  Tele¬ 
phone. 

Private  rights  of  way ;  of  street 
railways,  12. 

Private  telephone  lines  :  rates  in  Chi¬ 
cago,  279 ;  in  Washington,  D.  C., 
293-4,  298. 

Probate  court :  telephone  operation 
authorized  by,  Toledo,  312-3. 

Profits  from  use  of  franchises :  in¬ 
fluence  of  monopoly,  31-2 ;  mo¬ 
nopoly  profits,  and  ways  of  limit¬ 
ing  them,  chap,  iii,  34-72 ;  of 
New  York  Telephone  Company, 
261  ;  in  Wheeling  gas  business, 
621. 

Property  owners’  consents :  required 
for  street  railways  in  New  York, 
11  ;  in  Ohio,  12  ;  discussion  of,  74- 
5 ;  for  poles  in  New  Jersey,  332 ; 
for  construction  of  central  heating 
mains,  Toledo,  484  ;  for  laying  gas 
mains,  in  lieu  of  municipal  con¬ 
sent,  New  York  Mutual  Gas  Com¬ 
pany,  550. 

Public  control :  in  Massachusetts, 
252-8.  See  Supervision,  Streets, 


698 


INDEX  OF  VOLUME  I. 


Municipal  control,  Municipal  own¬ 
ership,  Public  utilities  commis¬ 
sion,  Public  service  commission. 

Publicity  of  accounts :  absence  of, 
9 ;  necessary  for  regulation  of 
rates,  46 ;  to  prevent  discrimi¬ 
nation,  82 ;  to  prevent  corruption, 
106-9  ;  to  prevent  campaign  con¬ 
tributions,  110;  as  to  damage 
claims,  111-12;  to  prevent  over- 
capitalization,  117 ;  in  Duluth 
electric  franchise,  163 ;  in  Nash¬ 
ville  electric  franchise,  168 ;  in 
Atlanta  electric  franchise,  176;  in 
Los  Angeles  electric  operations, 
181 ;  in  Minneapolis  electric  fran¬ 
chise,  190-1,  196  ;  in  Chicago  elec¬ 
tric  franchise,  205-6 ;  discussion 
of,  214 ;  of  proposed  telephone 
franchise,  New  York  City,  269, 
272 ;  in  Chicago  telephone  fran¬ 
chise,  274-5 ;  in  Portland,  Ore., 
telephone  franchise,  311 ;  in  Min¬ 
neapolis  and  St.  Paul  telephone 
franchises,  316 ;  in  Chicago  tele¬ 
graph  franchise,  345  ;  of  electrical 
subway  companies,  New  York  City, 
375,  378,  381  ;  of  Kansas  City, 
Mo.,  conduit  company,  390 ;  no 
provision  for,  in  Wheeling  gas 
franchises,  622.  See  Accounts. 

Public  lighting:  in  Salt  Lake  City, 
154-60  ;  in  Duluth,  162  ;  in  Nash¬ 
ville,  167 ;  in  Rockford,  Ill.,  169, 
171  ;  in  Wichita,  Ks.,  172 ;  in 
Grand  Rapids,  175  ;  in  Cedar  Rap¬ 
ids,  la.,  175;  in  Atlanta,  177;  in 
Columbus,  178 ;  in  Denver,  185, 
187 ;  in  Minneapolis  192 ;  in  New 
York  City,  544,  546-7,  554-6 ; 

in  Philadelphia,  571  ;  in  St.  Paul, 
577  ;  in  Des  Moines,  580,  581  ;  in 
Saginaw,  584 ;  in  Springfield,  Ill., 
589,  590 ;  in  Newport,  Ky.,  591  ; 
in  Cleveland,  600,  601,  602,  603; 
in  Kansas  City,  Mo.,  610,  616;  in 
Topeka,  618 ;  in  Baltimore,  623 ; 
in  Indianapolis,  631,  634;  in  Salt 
Lake  City,  651,  652.  See  Time 
schedule  for  public  lighting,  Gas, 
Electric  light.  Compensation  for 
franchises,  Free  service,  Special 
rates,  Reduced  rates,  Rates. 


Public  opinion :  attitude  towards 
franchise  grants,  2-7. 

Public  ownership.  See  Municipal 
ownership.  Government  owner¬ 
ship. 

Public  service  commission :  in  New 
York  City,  211. 

Public  utilities :  fundamental  princi¬ 
ples  relating  to,  130-2. 

Public  utilities  commission :  pro¬ 
posed  in  Baltimore,  625. 

Public  utilities  law :  Wisconsin, 
245-8. 

Purchase :  right  reserved  to  city, 
59-63,  320 ;  of  electric  fixtures, 
Jersey  City,  152 ;  of  electric  fran¬ 
chise,  Salt  Lake  City,  160 ;  after 
a  definite  period,  162-3,  168; 

right  to  purchase  at  stated  inter¬ 
vals,  179,  195,  215,  320,  392;  of 
electric  plant,  Denver,  185 ;  by 
new  company  at  expiration  of 
franchise,  258 ;  of  electrical  sub¬ 
way,  269 ;  reservation  in  Chicago 
telephone  franchise,  211-3;  prop¬ 
erty  and  good  will,  311  ;  after 
five  years,  315-16 ;  Ann  Arbor 
telephone  plant,  320 ;  of  plant  and 
property  of  messenger  and  delivery 
company,  359 ;  conduit  franchises 
should  contain  provision  for, 
369 ;  reservation  of  right  in  con¬ 
duit  franchise,  371  ;  provision  for, 
in  New  York  City  conduit  con¬ 
tract's,  378,  382;  of  Kansas  City, 
Mo.,  conduit  plant,  390  ;  of  water 
works,  402-4  ;  New  Haven  water 
plant,  411-13,  416;  on  six  months* 
notice,  420  ;  of  Los  Angeles  water 
plant,  433,  434  ;  of  Denver  water 
works,  440,  441,  443-5  ;  of  sewer 
system,  456,  462-3;  of  central 

heating  system,  476;  city  may 
purchase  or  license  a  purchaser 
for  central  heating  plant,  486  ;  of 
Duluth  central  heating  plant,  488; 
of  Nashville  central  heating  plant, 
493 ;  of  Chicago  pneumatic  tube 
system,  522 ;  clause  in  New  York 
City  gas  franchise,  548 ;  of  pri¬ 
vate  gas  works,  must  precede 
municipal  operation  in  Massa¬ 
chusetts,  562 ;  clause  in  Worces- 


INDEX  OF  VOLUME  I.  699 


ter  gas  franchise,  565 ;  clause  in 
Des  Moines  gas  franchise,  581  ; 
clause  in  Nashville  gas  franchise, 
587 ;  clause  in  Springfield,  Ill., 
gas  franchise,  590  ;  clause  in  New¬ 
port,  Ky.,  gas  franchise,  592,  593  * 
clause  in  Cleveland  gas  franchise, 
600 ;  city  reserves  right  at  any 
time,  Columbus,  608 ;  of  Kansas 
City,  Mo.,  gas  system  not  to  in¬ 
clude  franchise,  611,  615,  616, 

617 ;  Topeka  artificial  gas  system, 
619 ;  Wheeling  artificial  gas  sys¬ 
tem,  621-2 ;  provision  in  Balti¬ 
more  gas  franchise,  625 ;  provis¬ 
ion  in  Indianapolis  gas  franchises, 
638,  645 ;  city  of  Indianapolis 

transfers  option  to  new  company, 
641  ;  of  Detroit  gas  warks,  657 ; 
right  of  city  not  abrogated  by  new 
gas  ordinance,  Chicago,  660.  See 
Reservation  of  right,  Appraisal, 
Municipal  ownership.  Purchase 
price. 

Purchase  price :  upon  grant  to  an¬ 
other  company,  258 ;  of  Chicago 
telephone  plant,  281  ;  not  to  ex¬ 
ceed  cost  of  construction,  315  ;  of 
water  works,  403 ;  of  New  Haven 
water  works  and  franchises,  411- 
16 ;  arbitration  by  non-residents, 
420  ;  of  Los  Angeles  water  works, 
432-4  ;  of  Long  Branch  sewer  sys¬ 
tem,  456 ;  of  Atlantic  City  sewer 
system,  463 ;  of  Nashville  central 
heating  plant,  493  ;  to  be  paid  to 
county  treasurer,  Topeka  artificial 
gas  franchise,  620;  cost,  plus  10 
per  cent.,  Baltimore  gas  systems, 
625  ;  to  be  determined  by  arbitra¬ 
tion,  Indianapolis  gas,  638 ;  Salt 
Lake  City  gas  system,  equivalent 
to  offer  of  other  parties,  655. 
See  Purchase,  Arbitration,  Ap¬ 
praisal. 

Purity  of  water:  franchise  should 
guarantee,  73 ;  franchise  provis¬ 
ions  recommended,  402 ;  city  may 
protect  source  of  supply,  417  ;  re¬ 
quired  in  franchise  or  contract, 
418,  419 ;  provision  for  analysis, 
422 ;  quantity  and  quality  speci¬ 
fied,  445. 


Quality  of  gas.  See  Gas,  Heat 
value. 

Quality  of  water.  See  Purity  of 
water,  Filtration. 

Railroad  companies  :  owners  of  tele¬ 
graph  lines,  324. 

Rates :  demand  for  lower,  4 ;  fixing 
rates  in  the  franchise,  41-2 ;  reg¬ 
ulation,  42-6 ;  uniform,  without 
a  minimum  charge,  53-4 ;  sliding 
scale  device,  57-8 ;  discrimination 
forbidden,  81-5 ;  flat  rates,  85 ; 
based  upon  cost  of  service,  129 ; 
in  the  electrical  industry,  142 ; 
special,  for  different  services, 
145-7 ;  Jersey  City  electric,  152 ; 
Salt  Lake  City  electric,  153-4, 
157-60;  Duluth  electric,  162-3; 
Nashville  electric,  166-8 ;  Rock¬ 
ford,  Ill.,  electric,  169-71  ;  Wi¬ 
chita,  Ks.,  electric,  171-2 ;  Grand 
Rapids  electric  power,  174-5 ; 
Cedar  Rapids  electric,  175 ; 
Atlanta  electric,  177 ;  Columbus 
electric,  178-9;  Los  Angeles 

electric,  181 ;  Seattle  electric, 

182;  Denver  electric,  185-7; 

Minneapolis  electric,  191-5,  197 ; 
St.  Paul  electric,  199-200 ;  Chi¬ 
cago  electric,  202,  206 ;  Buffalo 
electric,  208-9  ;  discussion  of  elec¬ 
tric,  213;  cost  of  telephone  ser¬ 
vice,  232-7 ;  effect  of  competition, 
237-9,  265-6 ;  measured  versus 

flat,  242-5 ;  discrimination  in, 
245-9 ;  bid  of  lowest,  257 ;  inves¬ 
tigation  of  telephone  charges  in 
New  York  city,  264-6  ;  affected  by 
overcapitalization,  264 ;  proposed 

telephone  rates,  New  York  city, 
270-1  ;  of  Chicago  telephone  com¬ 
pany,  276-9 ;  New  Orleans  tele¬ 
phone,  286 ;  Washington,  D.  C., 
telephone,  289,  291  ;  competition 
to  reduce  telephone  rates,  Indian¬ 
apolis,  303-4,  307 ;  telephone,  not 
to  be  raised,  309  ;  Portland,  Ore., 
telephone,  310,  312 ;  Toledo  tele¬ 
phone,  314 ;  Minneapolis  and  St. 
Paul  telephone,  317 ;  telephone, 
to  adjoining  cities,  317,  319;  dis¬ 
cussion  of  telephone,  320,  322 ; 


700 


INDEX  OF  VOLUME  I. 


average  per  telephone  message, 
324  ;  regulation  of  telegraph,  327  ; 
in  Chicago  telegraph  franchise, 
345 ;  for  messenger  and  signal 
service,  Grand  Rapids,  351,  353 ; 
Salt  Lake  City,  353 ;  to  city,  for 
signal  boxes,  360,  361 ;  under  reg¬ 
ulation  of  board  of  estimate,  New 
York  City,  363,  366  ;  for  space  in 
electrical  subway,  376,  379-80 ; 

for  municipal  conduit  space,  384, 
387 ;  for  conduit  space,  392 ;  in 
model  water  franchise,  403 ;  in 
Ann  Arbor  water  franchise,  406- 
8 ;  of  New  Haven  water  com¬ 
pany,  411,  413-15;  for  water  in 
Indianapolis,  419,  421  ;  for  water 
under  general  laws  of  California, 
424 ;  for  water  in  Los  Angeles, 
433 ;  for  water  in  New  Orleans, 
438 ;  for  water  in  Denver,  441, 
442,  444 ;  in  Butte  water  fran¬ 
chise,  445-6 ;  in  Birmingham, 
Ala.,  water  franchise,  448 ;  regu¬ 
lation  in  Knoxville,  448 ;  for  hot 
and  cold  water,  Boise,  450 ;  for 
sewerage,  Long  Branch,  N.  J., 
456 ;  sewerage,  Atlantic  City, 
464-5 ;  for  central  heating, 
Detroit,  471  ;  for  central  heating, 
Kalamazoo,  473-4 ;  Columbus 
central  heating,  476 ;  Salt  Lake 
City  central  heating,  478 ;  Seattle 
central  heating  and  power,  479 ; 
South  Bend,  Ind.,  central  heat¬ 
ing,  480 ;  Kansas  City,  Mo.,  cen¬ 
tral  heating,  482 ;  regulation  by 
city  of  Toledo,  for  central  heat¬ 
ing,  484  ;  central  heating,  Indian¬ 
apolis,  485-7 ;  central  heating, 
Duluth,  488 ;  central  heating.  La 
Crosse,  Wise.,  497 ;  for  refrigera¬ 
tion  in  New  York  city,  502 ;  for 
refrigeration  in  Kansas  City,  Mo., 
505 ;  for  compressed  air,  to  be 
regulated  by  city,  524  ;  history  of 
gas  rates,  534  ;  discussion  of,  536  ; 
public  gas  lighting  in  New  York 
city,  545,  547,  553,  554,  556;  for 
gas  to  private  consumers,  New 
York  City,  553,  555,  556;  sliding 
scale  for  gas  in  Boston,  560,  562- 
4 ;  for  gas  in  Worcester,  Mass., 


565 ;  for  gas  under  Philadelphia 
lease,  571-2  ;  gas  rates  to  be  fixed 
by  arbitration,  Minneapolis,  573 ; 
gradual  reduction  of  gas  rates, 
St.  Paul,  576 ;  for  public  lighting 
in  St.  Paul,  577-8 ;  Des  Moines 
gas,  580  ;  for  gas  in  Saginaw,  582, 


584, 

585 ;  for  gas  in 

Nashville, 

587  ; 

for  gas  in  Springfield, 

Ill., 

589, 

590 ;  Newport, 

Ky., 

gas, 

591  ; 

Cincinnati  gas, 

595, 

596, 

598  ;  Cleveland  gas,  599,  600,  602  ; 
Columbus  natural  gas,  606-9 ; 
Kansas  City,  Mo.,  artificial  gas, 
609,  610 ;  natural  gas,  614,  616 ; 
for  natural  and  artificial  gas, 
Topeka,  Ks.,  618,  619;  Wheeling 
gas,  artificial  and  natural,  621-3  ; 
natural  gas  proposed  for  Balti¬ 
more,  625,  627 ;  to  be  fixed  for 
period  of  twenty  years,  628 ;  for 
gas  in  Indianapolis,  630,  631, 

632,  636,  637 ;  for  gas  in  out¬ 
lying  district's,  Indianapolis,  639  ; 
for  artificial  gas,  641,  644  ;  for 
gas  in  Toledo.  647 ;  for  natural 
gas  in  Erie,  649  ;  for  gas  in  Salt 
Lake  City,  650,  655 ;  different 

rates  for  fuel  and  light,  and 
gradual  reduction  with  increase 
of  sales,  Detroit,  656,  658-9 ;  for 
gas  in  Chicago,  659,  662. 

Readiness  to  serve :  rates  for  elec¬ 
tric  current,  Denver,  187 ;  Min¬ 
neapolis,  194. 

Real  estate:  profit's  to  franchise 
holders  by  exploitation  of,  70-2. 

Rebates :  by  telephone  company  in 
case  of  excessive  collections,  280 ; 
by  telegraph  company,  of  exces¬ 
sive  collections,  345 ;  for  poor 
service,  South  Bend,  Ind.,  central 
heating,  480 ;  for  poor  heating, 
Indianapolis  central  heating, 
486 ;  for  incorrect  meter  registra¬ 
tion  of  gas,  574 ;  for  inferior 
quality  of  gas,  575 ;  proposal  to 
rebate  40  per  cent  of  net  profits 
to  consumers,  Baltimore.  625. 

Reduced  rates  :  Rockford  electric,  for 
public  lighting,  169-71  ;  for  tele¬ 
phone  service,  246 ;  for  natural 
gas  for  fuel,  to  charitable  institu- 


INDEX  OF  VOLUME  I.  701 


tions  in  Erie,  Pa.,  650.  See 
Special  rates,  Discount's,  Rates. 

Referendum :  on  Grand  Rapids  elec¬ 
tric  power  franchise,  173 ;  on 
Denver  gas  and  electric  franchise, 
186 ;  optional,  on  telephone  fran¬ 
chises,  proposed  in  Massachu¬ 
setts,  257 ;  on  automatic,  com¬ 
peting  telephone  franchise,  Port¬ 
land,  Ore.,  309 ;  on  purchase  of 
messenger  system,  Portland,  Ore., 
359 ;  on  New  Haven  water  works 
franchise  and  purchase,  410, 
412-13;  on  purchase  of  water 
works,  Indianapolis,  420 ;  on 
Tuolumne  River  project,  San 
Francisco,  430 ;  on  bonds  for  Los 
Angeles  water  project,  434-5 ; 
on  Nashville  gas  franchise,  588. 

Refrigeration :  franchise,  Lockport, 
N.  Y.,  495 ;  cities  having  refrig¬ 
erating  systems,  498 ;  description 
of  pipe  line  refrigeration,  498 ; 
franchises,  chap,  xvi,  498-506. 

Refund.  See  Rebates,  Discounts 
and  rebates. 

Regulation  of  public  utility  corpo¬ 
rations.  See  Regulation,  Muni¬ 
cipal  control,  Supervision,  In¬ 
spection,  Construction,  Under¬ 
ground  construction,  Public  ser¬ 
vice  commission. 

Regulation :  of  rates,  42-6,  179, 

188,  192,  194-5,  199,  202,  369;  of 
telephone  companies,  261  ;  of  tele¬ 
phone  rates,  270,  279 ;  of  tele¬ 
phone  business,  Ann  Arbor,  319 ; 
of  telegraph  companies,  327  ;  of 
municipal  conduits,  in  detail, 
384-6 ;  of  conduits,  in  detail, 
386,  387,  392 ;  of  water  rates, 

Knoxville,  448,  449 ;  of  central 
heating  rates,  Toledo,  484 ;  of 
Kansas  City,  Mo.,  refrigeration 
rates,  505 ;  of  rates  for  com¬ 
pressed  air,  524  ;  of  gas  rates  by 
council,  Saginaw,  582 ;  governing 
use  of  gas,  subject  to  approval  of 
board  of  public  service,  597 ;  only 
on  condition  that  new  inventions 
lower  cost  of  producing,  654 ;  of 
Chicago  gas  rates  not  affected  by 
specified  conditions,  660.  See 


Supervision,  Streets,  Municipal 
control. 

Regulations :  for  safety,  88-90.  See 
Safety. 

Regulators :  of  gas  pressure,  542. 

Renewal :  of  worn  out  electric 

lamps,  193,  202 ;  of  telephone 

plant,  251  ;  of  Indianapolis  gas 
company’s  bond,  635. 

Renewal  of  franchises:  before  ex¬ 
piration,  20 ;  at  expiration,  60, 
258;  Salt  Lake  City  electric,  157; 
compensation  for,  266 ;  Chicago 
telephone,  273-4 ;  of  messenger, 
burglar  and  fire  alarm  company, 
362 ;  of  Baltimore  refrigeration, 
503 ;  compressed  air,  527 ;  auto¬ 
matic,  if  city  fails  to  purchase 
gas  plant  and  franchises,  Min¬ 
neapolis,  573 ;  of  Newport,  Ey., 
gas  franchise  refused,  592.  See 
Duration  of  franchises. 

Rental :  fees  for  telephone  instru¬ 
ments,  294,  299,  300.  See  Rates, 
Parent  and  holding  companies, 
Contracts. 

Reports :  annual,  of  gross  receipts, 
176  ;  of  telephone  companies,  Mas¬ 
sachusetts,  253,  255,  258  ;  of  cost 
of  underground  construction,  269  ; 
of  telephone  installations,  to 
police  commissioner,  271  ;  of 
gross  earnings,  272 ;  annual  re¬ 
ports  of  business  done,  275 ; 
quarterly  telephone  reports,  287, 
311  ;  annual,  Chicago  telegraph 
company,  345 ;  messenger  com¬ 
pany,  363 ;  of  Ann  Arbor  water 
business,  408 ;  of  New  Orleans 
water  business,  438 ;  of  Toledo 
central  heating  company,  484  ;  an¬ 
nual  financial  reports  of  New  York 
refrigerating  company,  501  ;  of 
Boston  Consolidated  Gas  Com¬ 
pany,  563 ;  of  lessee  of  Philadel¬ 
phia  gas  works,  569;  of  all  fran¬ 
chise  holders  in  St.  Paul,  576  ;  of 
betterments,  by  Des  Moines  gas 
company,  581  ;  by  Nashville  gas 
company,  587 ;  of  construction  in 
streets,  by  Syracuse  gas  com¬ 
pany,  593  ;  of  business  of  natural 
gas  companies,  Cleveland,  601 ; 


702 


INDEX  OF  VOLUME  I. 


by  artificial  gas  company,  To¬ 
peka,  Ks.,  619 ;  of  Baltimore  gas 
company,  624 ;  of  Indianapolis 
natural  gas  company,  632 ;  of  ar¬ 
tificial  gas  company,  642 ;  of  il¬ 
luminating  gas  sold  by  Detroit 
gas  company,  657. 

Repair  of  streets.  See  Restoring 
pavements,  Paving,  Streets,  Con¬ 
struction,  Supervision. 

Repaving.  See  Restoring  pave¬ 
ments. 

Repeal.  See  Revocable  grants, 
Forfeiture  of  franchises. 

Reservation  of  right :  to  supervise 
rates,  42,  179,  188,  192,  194-5, 
199,  202,  279,  348,  363,  366, 

483,  484,  506,  637 ;  to  purchase 
at  expiration  of  franchise,  59- 
63,  281,  305,  439,  441,  443;  to 
use  fixtures,  155,  156,  160,  167, 
177,  189,  204  ;  to  maintain  muni¬ 
cipal  fixtures,  155,  175,  197,  483; 
to  amend  franchise,  161,  173,  472  ; 
to  revoke  franchise,  161,  164,  169, 
304,  355,  391,  624 ;  to  purchase 
at  stated  times,  162,  163,  167, 
168,  179,  186,  195,  315,  318, 

420,  456,  488,  625  ;  to  relay  pave¬ 
ment,  178,  189 ;  to  inspect  plant 
and  apparatus,  189 ;  to  place 
company’s  lines  in  municipal 
conduits,  199,  280 ;  to  grant 

franchise  to  competing  company, 
206,  280,  309 ;  to  purchase  con¬ 
duits,  269,  522;  to  require  im¬ 
provements,  270 ;  to  designate 
licensee,  283;  to  grant  franchise 
to  another  company  at  expiration 
of  existing  grant,  306 ;  discussion 
of  reservations,  322 ;  to  purchase 
water  works  at  any  time,  407 ;  to 
acquire  plant  and  franchises  by 
condemnation,  463 ;  to  intervene 
in  injunction  suits,  St.  Louis, 
522 ;  of  municipal  ownership  of 
lighting  system,  617 ;  to  make  an¬ 
nual  charge  per  lineal  foot  of  gas 
mains,  637. 

Reserve  fund :  in  Chicago  telephone 
franchise,  284.  See  Deprecia¬ 
tion. 

Reservoir  for  water  supply ;  fran¬ 


chise  requirement  recommended, 
401 ;  in  Ann  Arbor,  404. 

Responsibility  for  damages.  See 
Damages. 

Restoring  pavements :  in  Columbus, 
178 ;  in  New  York  city,  259 ;  by 
Atlantic  Telephone  Company,  269 ; 
by  Chicago  telephone  company, 
280 ;  charge  for,  Toledo  telephone 
315 ;  Newark  telegraph  fran¬ 
chise,  334 ;  Chicago  telegraph 
franchise,  346 ;  includes  repairs 
for  three  years.  Grand  Rapids, 
351  ;  by  conduit  company,  New 
York  city,  377 ;  by  conduit  com¬ 
pany,  Syracuse,  388 ;  by  water 
company,  Indianapolis,  418 ;  New 
Orleans,  438  ;  Denver,  442 ;  Butte, 
446 ;  by  sewer  company,  Long 
Branch,  N.  J.,  455 ;  fund  must  be 
deposited,  Detroit  central  heating 
company,  470 ;  Kalamazoo,  473 ; 
by  central  heating  company,  Co¬ 
lumbus,  475,  477 ;  Toledo,  484 ; 
New  York  city,  489 ;  Newark, 
494 ;  Baltimore  refrigeration, 
502 ;  Wichita,  505 ;  by  gas  com¬ 
panies,  New  York  city,  545 ; 
Somerville,  566 ;  Syracuse,  593 ; 
by  natural  gas  company,  Cleve¬ 
land,  604  ;  by  gas  company,  Bal¬ 
timore,  624,  625 ;  Indianapolis, 

630,  634,  635 ;  Detroit,  656. 

See  Paving,  Supervision,  Con¬ 
struction,  Underground  construc¬ 
tion,  Security  fund. 

Reversion ;  of  property  to  city,  63, 
64 ;  of  fixtures  in  the  streets  to 
city,  267,  362 ;  of  property  on 
forfeiture  of  franchise,  New 
York  telephone,  273 ;  of  police 
telephone  system,  Portland,  Ore., 
311 ;  of  messenger  and  signal  fix¬ 
tures,  New  York  City,  362  ;  of  re¬ 
frigeration  conduits,  500;  of  pub¬ 
lic  gas  lamps  to  city,  Cleveland, 
602 ;  of  gas  plant  and  property, 
Indianapolis,  642-3.  See  Forfeit¬ 
ure,  Expiration. 

Revocable  grants :  Duluth  electric, 
161  ;  Richmond  electric,  164 ; 
Nashville  electric,  168;  Massa¬ 
chusetts  electric,  257 ;  under 


INDEX  OF  VOLUME  I. 


703 


Federal  law,  Washington,  D.  C., 
290,  291 ;  Indianapolis  telephone, 
304 ;  for  telegraph  pole  lines, 
327,  330,  338,  343 ;  of  right  to 
use  surplus  water  from  city 
pumping  station,  525.  See  For¬ 
feiture,  Reservation  of  right. 

Revocable  permits :  for  construction 
of  pneumatic  tubes,  519.  See 
Revocable  grants,  Forfeiture. 

Rhode  Island :  division  of  street 
railway  profits  with  city,  58. 

Richards,  J.  L. :  president  of  Bos¬ 
ton  Consolidated  Gas  Company, 
quoted,  564. 

Richmond,  Va. :  electric  franchises, 
164-5 ;  franchise  to  use  surplus 
water  for  power,  and  to  main¬ 
tain  compressed  air  system,  525-8. 

Rights  of  way :  private,  12,  208. 

Rochester :  conduit  franchise,  387. 

Rockford,  Ill. :  electric  franchises, 
169-71. 

Ross,  John  W. :  commissioner  of  the 
District  of  Columbia,  on  public 
utility  franchises  in  Washington, 
393-4. 

Royalty :  on  telephone  patents,  222. 
See  Rental,  Parent  and  holding 
companies. 

Rural  telephones :  Statistics  of, 
217,  218. 

Safety  regulations  made  and  ap¬ 
pliances  required,  88-91 ;  Nash¬ 
ville  electric  franchise,  165 ; 
wires,  316. 

Saginaw,  Mich. :  gas  franchises, 
582-6. 

St.  Joseph,  Mo. :  private  ownership 
of  water  works,  398. 

St.  Louis :  general  conduit  fran¬ 
chise,  370-2 ;  pneumatic  tube 
franchise,  520. 

St.  Paul :  heating  and  electric  fran¬ 
chise,  198-200 ;  telephone  fran¬ 
chises,  315  ;  gas  franchise,  576-9. 

Sale  of  franchises:  discussion  of 
38-40 ;  Denver  electric,  184,  188 ; 
telephone,  in  Massachusetts,  257 ; 
telephone,  in  New  York  city, 
267 ;  signaling,  in  New  York 
city,  365 ;  to  refrigerating  com¬ 


pany,  New  York  city,  500.  See 
Compensation  for  franchises,  As¬ 
signment,  Consolidation,  Mon¬ 
opoly,  Purchase,  Appraisal,  Ar¬ 
bitration,  Combination. 

Saloons :  interest  of  public  utility 
companies  in  the  “  open  town,” 
103-5.  See  Corruption. 

Salt  Lake  City :  electric  franchises, 
152-61 ;  messenger,  night  watch 
and  fire  alarm  franchise,  353 ; 
franchise  for  mineral  baths,  449 ; 
central  heating  franchises,  477- 
8  ;  gas  franchises,  650-5. 

San  Diego,  Calif. :  automatic  tele¬ 
phone  system,  309. 

San  Francisco :  number  of  tele¬ 
phone  stations  in,  240 ;  plans  for 
water  supply,  398 ;  water  fran¬ 
chise  from  Federal  government 
for  Hetch  Hetchy  project,  423-31. 

Sanitary  accommodations  :  for  street 
gangs,  520. 

Scranton,  Pa. :  private  ownership 
of  water  works,  398. 

Seattle :  utility  commissioner  ap¬ 
pointed,  100 ;  electric  franchises, 
181-4 ;  fire  alarm,  district  tele¬ 
graph,  burglar  and  police  alarm 
franchise,  354-5 ;  steam  for  both 
heat  and  power,  478-80 ;  refrig¬ 
eration  franchise,  506. 

Security  fund :  Jersey  City  electric, 
152;  Columbus  electric,  179; 

Springfield,  Mass.,  telephone, 
256 ;  New  York  telephone,  272 ; 
Chicago  telephone,  280 ;  Ann 

Arbor  telephone,  319  ;  Kansas  City, 
Mo.,  conduit,  389 ;  to  guarantee 
construction,  Detroit  central  heat¬ 
ing,  472  ;  deposit  to  cover  cost  of 
opening  and  repairing  streets, 
New  York  city  central  heating, 
489 ;  refrigeration,  New  York 

city,  501  ;  Baltimore,  503 ;  es¬ 
timated  cost  of  repairing  streets, 
Chicago  pneumatic  tube,  522 ; 

fund  to  guarantee  construction, 
523 ;  compressed  air  system, 
525 ;  to  cover  cost  of  restoring 
street,  Dallas  fuel  oil,  532 ;  gas 
system,  Kansas  City,  Mo.,  610, 
612,  613 ;  to  guarantee  construe- 


704 


INDEX  OF  VOLUME  I. 


tion  according  to  contract,  Topeka, 
Ks.,  619 ;  bond  to  guarantee  in¬ 
dependent  operation,  Indianapolis 
gas  company,  629 ;  to  guarantee 
construction,  643.  See  Indem¬ 
nity,  Penalty  fund,  Deposit,  Dam¬ 
ages,  Construction,  Restoring 
streets. 

Service  at  a  discount.  See  Com¬ 
pensation  for  franchises,  Dis¬ 
counts  and  rebates,  Reduced 
rates,  Special  rates. 

Service  charges.  See  Minimum 
charge. 

Service  pipes  :  Dallas  compressed  air, 
524 ;  Des  Moines  gas,  580 ;  must 
be  laid  prior  to  paving,  Nash¬ 
ville,  588 ;  at  expense  of  com¬ 
pany,  Springfield,  Ill.,  590 ;  ex¬ 
pense  divided  between  company 
and  consumer,  Newport,  Ky.,  592  ; 
at  expense  of  company,  Syracuse, 
594  ;  laid  by  company  to  point 
of  consumption  on  premises,  Cin¬ 
cinnati,  597 ;  customer  to  pay 
cost,  Cleveland,  600 ;  cost  divided 
between  company  and  consumer, 
Topeka,  Ks.,  618 ;  free  to  con¬ 
sumers,  artificial  gas  franchise, 
Topeka,  621  ;  at  actual  cost  of 
work,  Indianapolis,  630 ;  to  be 
laid  to  property  line,  Indianapolis, 
636,  644  ;  to  curb  line,  Toledo, 
647 ;  to  belong  to  company,  648, 
649 ;  in  Detroit  gas  franchise, 
655,  657. 

Service  rendered  by  public  utilities  : 
improvement  of,  5,  51  ;  adequate, 
42 ;  profits  increased  by  creating 
special  demands  for,  64-5  ;  special 
service  for  discommoded  patrons, 
77-8  ;  compulsory,  79-81  j  at  cost, 
130-2;  prescribed,  Salt  Lake 
City  electric,  156 ;  compulsory, 
Seattle,  181-3;  Minneapolis  elec¬ 
tric,  190;  electric  and  telephone 
combined,  220 ;  peculiarities  of 
telephone,  226-32 ;  cost  of  tele¬ 
phone,  232-7  ;  telephone,  240  ;  ef¬ 
fect  of  measured  rates  on  tele¬ 
phone  service,  244-5  ;  efficiency  of 
New  York  Telephone  Company, 
262 ;  effect  of  telephone  competi¬ 


tion,  265-6 ;  telephone  service  to 
illegal  places  forbidden,  271  ;  effi¬ 
ciency  required,  268,  276;  tele¬ 
phone  service  in  New  Orleans, 
285,  287 ;  in  Washington,  D.  C., 
302-3 ;  first-class,  required,  Indi¬ 
anapolis  telephone  franchise,  307  ; 
telegraph  service,  336 ;  com¬ 
pressed  air  system,  524 ;  refusal 
of  service,  549,  554.  See  Dis¬ 
crimination. 

Sewer  franchises,  chap,  xiv,  451-65. 

Sewers :  sanitary,  454 ;  combined, 
454 ;  materials  for,  specified, 
458 ;  connection  with,  46-1. 

Shade  trees :  owner’s  consent  for 
trimming  required,  151  ;  official 
supervision  of  cutting,  172 ;  cut¬ 
ting  by  electric  companies,  328, 
329;  Detroit',  470;  Boston,  520. 

Short  term  franchises :  discussion 
of,  34-6 ;  limit  value,  59 ;  to 
prevent  overcapitalization,  117. 

Shutting  off  supply ;  to  make 
repairs,  Duluth  central  heating, 
488 ;  Kansas  City  natural  gas, 
613.  See  Penalty. 

Signals.  See  Messenger  and  Signal 
franchises. 

Significance  of  franchises,  28. 

Single  tax :  a  way  to  resume  fran¬ 
chise  values,  4S. 

Sinking  fund :  provision  for,  New 
Britain,  Ct.,  municipal  conduits, 
386.  See  Depreciation,  Reserve 
fund. 

Sliding  scale :  discussion  of,  57,  58  ; 
for  gas  in  Boston,  562. 

Smoke  nuisance ;  consumer  recom¬ 
mended,  152;  prescribed,  154,  170. 

Somerville,  Mass. :  pole  ordinance, 
336 ;  gas  permits,  566. 

South  Bend,  Ind. ;  telegraph  pole 
regulations,  343 ;  franchise  for 
central  heat  and  power  plant,  hot 
water  and  steam,  480. 

Special  franchises :  to  manufac¬ 
turers,  for  natural  gas,  Wheeling, 
622  ;  Indianapolis,  640. 

Special  franchise  values :  elimina¬ 
tion  of,  130-2. 

Special  rates :  by  secret  contract, 
82 ;  for  different  services,  145-7 ; 


INDEX  OF  VOLUME  I. 


705 


for  public  lighting,  153,  156, 

171,  172  ;  must  be  filed  with  city, 
194 ;  for  telephone  service  to 
semi-public  institutions,  247 ;  for 
telephones  to  clergymen,  churches, 
and  charitable  institutions,  288 ; 
in  Kansas  City,  Mo.,  natural  gas 
franchise,  614 ;  in  Indianapolis 
natural  gas  franchise,  637 ;  for 
gas  engines,  Detroit,  658.  See 
Compensation  for  franchises, 
Reduced  rates. 

Springfield,  Ill. :  free  telegraph  serv¬ 
ice  in,  342 ;  police  and  fire  alarm 
and  messenger  franchise,  361 ; 
gas  charter  awarded  after  public 
advertisement,  588. 

Springfield,  Mass. :  street  railway 
earnings,  61  ;  telephone  regula¬ 
tions,  256 ;  gas  permits,  565. 

Sprinkling  rates :  in  Butte,  Mont., 
445.  See  Rates,  Water. 

Standard  Oil  Company :  as  having 
utility  monopoly,  126 ;  franchises 
in  Cleveland,  529-30 ;  in  Jersey 
City,  531. 

Standpipe.  See  Reservoir. 

Statistics :  of  utilities,  1-2 ;  of  in¬ 
come  from  sale  of  by-products, 
68 ;  of  accidents,  89 ;  of  electric 
light,  heat  and  power,  135-6 ;  of 
municipal  operation  in  the  elec¬ 
trical  industry,  140-1  ;  of  electric 
power,  146-7 ;  New  York  city, 
electric,  209 ;  of  telephones,  217- 
23,  242 ;  of  the  telegraph,  323-6  ; 
of  conduits  in  Washington,  D.  C.. 
396 ;  of  municipal  and  private 
water  works,  397-9 ;  of  sewers. 
451  ;  of  central  heating,  466, 
469  ;  of  artificial  gas,  533-6,  543  ; 
of  natural  gas,  537-40.  See 
Capitalization. 

Statutory  limitations :  general,  23. 
See  General  laws,  Legislature. 

Steam  heating  and  power  :  furnished 
by  electric  companies,  68  ;  in  Salt 
Lake  City,  153 ;  central  heating 
franchises,  chap,  xv,  466-97. 

Stock.  See  Capitalization,  Over- 
capitalization. 

Street  lamps.  See  Equipment, 
Public  lighting. 


Street  lighting.  See  Public  lighting. 

Street  railways :  statistics  of,  1 ; 
early  development,  3 ;  unused 
franchises  on  Manhattan  Island, 
6 ;  suburban  franchises,  13 ; 
trackage  rights,  22 ;  significance 
of,  25 ;  compensation  for  fran¬ 
chises,  40 ;  special  obligations 
imposed  upon,  49-50 ;  improved 
service,  51  ;  extensions  of,  51-3 ; 
trackage  rental,  69 ;  exploitation 
of  real  estate  by,  71 ;  amusement 
parks,  77 ;  requirements  for 
safety,  89 ;  Brooklyn  situation, 
93 ;  underground  construction, 
94-8 ;  tendency  toward  consolida¬ 
tion,  126 ;  transit  improvements, 
127-8 ;  ownership  of  tracks  by 
city,  370. 

Streets :  interference  with  other 

users,  94-8 ;  limitation  of  open¬ 
ings,  152,  373,  455,  475 ;  restora¬ 
tion  to  good  condition,  178,  259, 
269,  280 ;  permit  for  work,  256, 
378 ;  city  reserves  legislative 
and  police  powers  over  the 
streets,  357 ;  sewerage  construc¬ 
tion,  457  ;  work  under  regulations 
of  board  of  public  works,  492 ; 
regulation  of  construction  in 
streets,  Seattle  refrigeration, 
506 ;  construction  of  pneumatic 
tubes,  New  York  city,  516,  518; 
revocable  permit's  for  pneumatic 
tube  construction,  Boston,  518-20 ; 
regulation  of  work  by  New  York 
city  gas  companies,  546,  550, 

554,  555,  557 ;  permanent  injury 
forbidden,  Nashville  gas,  587 ; 
three  days’  notice  required  before 
excavating,  Indianapolis  gas,  630 ; 
special  permit  required  for  work 
in  Summit  St.,  Toledo  gas,  646 ; 
Salt  Lake  City  gas,  653.  See 
Construction,  Underground  con¬ 
struction,  Supervision,  Inspec¬ 
tion,  Fixtures  in  the  streets. 

Streets,  public  control  of :  import¬ 
ance  of,  5-6,  96  ;  imperative,  130- 
2.  See  Municipal  control,  Muni¬ 
cipal  ownership  and  operation,  Su¬ 
pervision,  Inspection,  Streets. 

Strikes :  exempting  companies  from 


706 


INDEX  OF  VOLUME  I. 


penalties  for  non-operation,  56, 
470,  608,  653.  See  Delays. 

Subsidiary  companies.  See  Parent 
and  holding  companies. 

Suburban  districts :  franchises 

granted  by,  13 ;  neighborhood  ex¬ 
changes  for,  132  ;  gas  pipes  in  city 
and  suburbs,  Springfield,  Ill.,  588  ; 
extension  of  city  franchise  to, 
Erie  gas,  649. 

Supervision  by  state :  of  telephone 
business,  230,  238,  252-8. 

Supervision,  municipal :  of  rates, 
42  ;  of  fixtures,  138,  142 ;  of  elec¬ 
trical  construction,  151,  152-4, 

178  ;  of  telephone  construction  and 
operation,  268 ;  by  city  engineer, 
313 ;  of  telegraph  conduits,  346 ; 
of  construction  work  of  messenger 
company,  363 ;  of  conduit  con¬ 
struction,  368,  372  ;  expense  to  be 
paid  by  conduit  company,  376 ; 
of  municipal  conduits,  384,  385  J 
of  conduit  construction,  388,  389, 
394  ;  of  refrigeration  construction, 
Kansas  City,  Mo.,  504 ;  by  street 
commissioner,  506 ;  expense  to  be 
paid  by  gas  company,  594. 

Supply  :  possible  failure  of,  gas,  540  ; 
Kansas  City  natural  gas,  614, 
617-8 ;  Baltimore,  628 ;  failure  in 
Indianapolis,  641  ;  in  Toledo,  646. 
See  Shutting  off  supply,  Services 

Supreme  Court.  See  Court,  United 
States  Supreme  Court'. 

Surplus:  profits  from  the  sale  of, 
69-70. 

Surrender  of  prior  grants :  not  im¬ 
plied  in  new  Denver  electric  fran¬ 
chise,  187 ;  in  Minneapolis  elec¬ 
tric  franchise,  197  ;  recommended, 
216 ;  by  acceptance  of  new  fran¬ 
chise,  Seattle,  355. 

Syracuse :  conduit  franchises,  388- 
9 ;  gas  franchises,  593-4. 

Taxation  of  New  Haven  water 
company,  409,  415,  416 ;  of  Los 
Angeles  water  company,  433  ;  New 
Orleans  water  company  exempted 
from,  438,  439 ;  Birmingham 

water  company  exempted  from, 
447 ;  Newark  central  heating  prop¬ 


erty  not  exempt,  494 ;  Baltimore 
refrigeration  property  not  ex¬ 
empt,  503-4 ;  percentage  of  gross 
receipts  in  lieu  of  all  other,  527 ; 
exemption  for  three  years,  548, 
573.  See  Taxes. 

Taxes :  the  imposition  of  special,  46- 
9 ;  single  tax,  48 ;  on  dividends, 
58 ;  on  franchise  values,  131  ;  on 
poles,  154,  328,  331,  335,  338,  339; 
upon  gross  receipts,  Rockford,  Ill., 
168 ;  upon  gross  receipts,  Chicago 
electric,  201,  204  ;  upon  telephone 
property,  267 ;  on  messenger  and 
signal  franchise,  352 ;  annual  li¬ 
cense  fee  credited  on,  457.  See 
Gross  receipts,  Taxation. 

Taxpayers  :  streets  do  not  belong  to, 
131. 

Telegraph :  compared  with  the  tele¬ 
phone,  219 ;  conditions  imposed 
upon  it  by  local  authorities,  chap, 
x,  323-48. 

Telegraph  poles :  usual  local  regula¬ 
tions  of,  327-8 ;  under  general 
laws  of  Pennsylvania,  328-9 ;  in 
Erie,  329-30  ;  in  Harrisburg,  330- 
1  ;  in  Lancaster,  331  ;  in  Newark, 
331-4 ;  in  Jersey  City,  334-5 ;  in 
Trenton,  335 ;  under  general  laws 
of  Massachusetts,  336 ;  in  Somer¬ 
ville,  Mass.,  336-7 ;  in  Indianapo¬ 
lis,  338-9 ;  in  Toledo,  340 ;  in 
Nashville,  342-4 ;  in  Grand  Rap¬ 
ids,  350;  in  Salt  Lake  City,  353; 
in  Seattle,  354 ;  in  Portland, 
Ore.,  359 ;  in  Butte,  360.  See 
Poles,  Pole  tax,  Taxes,  License 
fees. 

Telephone :  statistics  of,  2,  217-22 ; 
significance  of,  26 ;  meters,  86, 
227-8 ;  service,  87 ;  competition, 
124;  as  a  utility,  chap,  viii,  217- 
51  ;  franchise  regulations,  chap, 
ix,  252-322 ;  as  a  competitor  of 
the  telegraph,  325. 

Telephone  commission,  Chicago :  on 
meters  and  rates,  227-8,  243-4 ; 
on  accounts,  248. 

Telephone  exchanges  :  use  of.  231-7  ; 
discrimination  forbidden,  254 ;  in 
New  York  city,  262.  See  Tele¬ 
phone. 


INDEX  OF  VOLUME  I. 


707 


Telephone  rates.  See  Flat  rates, 
Measured  rates,  Rates. 

Temptations  to  public  wrong  and 
how  to  prevent'  them,  chap,  v,  101- 
34. 

Terms  of  franchises.  See  Duration 
of  franchises  ;  Indeterminate  fran¬ 
chises  ;  Franchises,  limited ;  Fran¬ 
chises  with  no  time-limit ;  Per¬ 
petual  franchises. 

Territory  included  in  franchise 
grants :  by  suburban  districts,  13  ; 
growth  of  cities,  14  ;  street's  enu¬ 
merated,  Jersey  City  electric  light. 
150  ;  streets  now  or  hereafter  laid 
out,  151 ;  streets  specified,  Du¬ 
luth  electric,  161,  162 ;  Nashville 
electric,  167 ;  present  and  future 
streets,  Rockford,  Ill.,  169;  streets 
designated  on  a  map.  Grand  Rap¬ 
ids  electric  power.  173 ;  present 
and  future  streets.  Seattle  electric, 
183 ;  includes  territory  hereafter 
to  be  added,  Minneapolis  electric, 
188;  divided  into  two  districts, 
Buffalo  electric  power,  207 ;  di¬ 
vided  into  districts,  New  York 
City,  209 ;  city  should  control  lo¬ 
cations,  215 ;  present  and  future 
limits  of  city,  Chicago  telephone, 
281  ;  streets  enumerated,  Denver, 
356 ;  throughout  the  city,  electri¬ 
cal  conduits,  Minneapolis,  390 ; 
streets  now  or  hereafter  laid  out, 
Indianapolis  water  supply,  418 ; 
certain  streets,  Salt  Lake  City  hot 
water,  449 ;  any  and  all  streets, 
Long  Branch  sewerage,  455  ;  pres¬ 
ent  and  future  streets,  Austin, 
Texas,  sewers,  457 ;  any  streets, 
Detroit  central  heating,  469  ;  speci¬ 
fied  streets,  Salt  Lake  City  central 
heating,  477 ;  as  bounded  at  any 
time  during  the  life  of  the  grant. 
South  Bend,  Ind.,  central  heating, 
480 ;  limits  as  now  or  hereafter 
established,  Kansas  City,  Mo.,  cen¬ 
tral  heating,  481  ;  limited  area, 
482 ;  one  street,  Toledo  central 
heating,  483 ;  limited  area,  Indi¬ 
anapolis  central  heating,  485 ;  au¬ 
tomatic  extension,  485 ;  specified 
streets,  Duluth  central  heating, 


488 ;  present  and  future  bound¬ 
aries,  Nashville  central  heating, 
492  ;  a  certain  portion  of  the  city, 
Newark  central  heating,  494 ;  the 
streets,  Lockport  central  heating, 
495 ;  the  streets  of  a  city  near 
Buffalo,  496 ;  the  streets  of  the 
city,  La  Crosse,  Wis.,  497 ;  re¬ 
frigeration  franchises  for  re¬ 
stricted  areas,  499-505 ;  streets 
and  public  places,  Seattle  refriger¬ 
ation,  506 ;  pneumatic  tubes,  gen¬ 
eral  law,  New  York,  516 ;  pneu¬ 
matic  tubes,  general  law,  Massa¬ 
chusetts,  518 ;  specified  streets, 
pneumatic  tubes  for  mail,  St. 
Louis,  520 ;  Chicago  pneumatic 
tubes,  521 1  Dallas,  Tex.,  com¬ 
pressed  air,  524  ;  oil  pipe  lines  in 
certain  streets,  Cleveland,  Toledo, 
Jersey  City,  529-31  ;  all  the 
streets  of  the  city  but  one,  Dallas 
fuel  oil,  532 ;  gas  in  New  York 
city,  544—52,  556,  558 ;  Boston 

artificial  gas,  560,  561  ;  within  city 
limits,  Minneapolis  artificial  gas, 
573-4  ;  streets  of  the  city,  Des 
Moines,  Iowa,  artificial  gas,  580 ; 
Saginaw  artificial  gas.  585 ;  any 
of  the  streets  of  the  city  or  the 
suburbs,  Springfield,  Ill.,  artificial 
gas,  588 ;  the  city,  Newport,  Ky., 
artificial  gas,  591  ;  as  the  city  now 
exists  or  may  hereafter  be  ex¬ 
tended,  Cincinnati  natural  gas, 
596 ;  the  city,  Columbus  natural 
gas,  606 ;  present  and  future 
limits,  Kansas  City  artificial  gas, 
609  ;  whole  area  of  city.  Wheeling 
natural  gas,  622 ;  streets  of  the 
city,  Baltimore  gas.  623,  625 ; 

Indianapolis  gas  630.  635 ;  the 

streets,  Toledo  natural  gas,  646. 
See  Locations,  Exclusive  fran¬ 
chises. 

Testing  of  meters.  See  Meters,  In¬ 
spection. 

Theft.  See  Dishonesty,  Employees, 
Corruption. 

Time  limit  in  franchise  grants. 
See  Duration  of  franchises;  Fran¬ 
chises,  no  time-limit' ;  Perpetual 
franchises ;  Franchises,  limited. 


708 


INDEX  OF  VOLUME  I. 


Time  schedule  for  public  lighting : 
Salt  Lake  City,  154,  158,  159; 
Duluth,  162 ;  Nashville,  166  *, 
Rockford,  Ill.,  171  ;  Denver,  185 ; 
New  York  City,  547  ;  Des  Moines, 
580 ;  Cleveland,  601,  602 ;  Kan¬ 
sas  City,  Mo.,  610 ;  Topeka,  Ks., 
618. 

Toledo:  franchise  conditions  ap¬ 
proved  by  probate  court,  312-5 ; 
telegraph  franchises,  340 ;  central 
heating  franchises,  483-5 ;  oil 
pipe  line  franchises,  530 ;  natural 
and  artificial  gas  franchises,  646- 
9 ;  lease  of  municipal  natural  gas 
system,  648-9. 

Toll  lines.  See  Pay  stations,  Long 
distance  telephone  lines. 

Tolman,  Major  Edgar  B. :  quota¬ 
tion  from,  in  regard  to  Chicago 
telephone  situation,  274. 

Topeka,  Ks.  :  natural  and  artificial 
gas  franchises,  618-21. 

Trackage  rights :  in  lieu  of  fran¬ 
chises,  22 ;  charges  for,  69. 

Transfer.  See  Assignment,  Consoli¬ 
dation. 

Trenton :  telegraph  poles  and  wires, 
335. 

Troy :  conduit  franchise,  387. 

Tubbs,  J.  Nelson,  outline  of  model 
water  franchise,  402-4. 

Underground  construction  :  required, 
90-1  ;  of  different  utilities,  94-8, 
in  paved  district'.  Salt  Lake  City, 
160  ;  Richmond,  Va.,  electric,  164  ; 
Rockford,  Ill.,  electric,  169 
Grand  Rapids  electric  power,  174  ; 
Atlanta  electric,  176 ;  Columbus 
electric,  177-8;  Denver  electric, 
184;  Minneapolis  electric,  188; 
St.  Paul  electric,  178-9  ;  Chicago 
electric,  205  ;  Buffalo  electric,  207  ; 
in  Masachusetts,  211  ;  recom¬ 
mended,  214  ;  Springfield  electric, 
256;  permit  required  for,  269;  in 
advance  of  paving,  Chicago,  281  ; 
in  Washington,  D.  C.,  290;  Indi¬ 
anapolis  telephone  conduits,  304  ; 
Toledo  telephone,  314 ;  under  su¬ 
pervision  of  board  of  public  works, 
Grand  Rapids  messenger  and  sig¬ 


nal,  351  ;  plan  must  be  submitted, 
Nashville  conduits,  373 ;  condi¬ 
tions  in  water  franchise,  403  ;  for 
water  supply,  must  precede  pav¬ 
ing,  Indianapolis,  417 ;  of  sewer¬ 
age  system,  Austin,  Tex.,  457, 
459  ;  Detroit  central  heating,  470  ; 
central  heating  pipes  to  be  placed 
in  alleys  or  under  sidewalks,  Co¬ 
lumbus,  475  ;  Salt  Lake  City  cen¬ 
tral  heating,  477  ;  to  precede  pav¬ 
ing,  Seattle  central  heating,  479 ; 
South  Bend,  Ind.,  central  heating, 
480 ;  pipes  to  be  laid  in  alleys, 
Kansas  City,  Mo.,  central  heating 
482 ;  removal  of  property  forbid¬ 
den,  Indianapolis  central  heating, 
487,  488 ;  under  supervision  of 
commissioner  of  public  works,  489, 
491  ;  under  supervision  of  street 
commissioner,  496 ;  of  Baltimore 
refrigeration  company,  503 ;  for 
pneumatic  tubes  in  New  York 
City,  516  ;  for  pneumatic  tubes  in 
Chicago,  521-2 ;  Cleveland  oil 
pipe  lines,  529—30 ;  written  per¬ 
mit  required  except  in  emergen¬ 
cies,  Toledo,  531  ;  of  New  York 
gas  companies,  544,  545,  546,  554, 
555,  557,  559 ;  Boston  gas  com¬ 
pany  560 ;  Springfield,  Mass.,  gas 
company,  565 ;  Saginaw  gas  com¬ 
pany,  583 ;  Nashville  gas  com¬ 
pany  587,  588 ;  Springfield,  Ill., 
gas  company,  589 ;  must  not  dis¬ 
turb  city  or  private  pipes,  Balti¬ 
more,  624,  625  ;  record  of,  must  be 
filed,  624  ;  must  be  done  in  a  man¬ 
ner  satisfactory  to  city,  Indianapo¬ 
lis.  636,  643. 

Uniform  rates :  without  a  minimum 
charge,  53-4.  See  Rates,  Flat 
rate,  Discrimination. 

Union  labor.  See  Employees. 

United  Railway  and  Electric  Com¬ 
pany  of  Baltimore :  number  of 
subsidiary  companies,  29. 

United  States  mail.  See  Mail. 

United  States  revenue  tax :  on  gas, 
Toledo,  647. 

United  Statefe  Supreme  Court : 
eighty-cent  gas  decision,  43-5, 
543,  560. 


INDEX  OF  VOLUME  I 


709 


Unpaid  bills :  telephone,  271.  See 
Penalty. 

Utility  companies :  identification  of 
equipment  and  employees,  93-4, 
174,  254,  280  ;  a  tribunal  for  hear¬ 
ing  complaints,  99—100 ;  rank  of 
telephone  among  utilities,  320. 
See  Complaints,  Capitalization. 

Valuation  :  not  to  include  unex¬ 
pired  franchise,  390 ;  of  refriger¬ 
ation  franchise  and  fixtures,  499. 
See  Appraisal,  Franchise,  Pur¬ 
chase,  Purchase  price.  Arbitration. 

Value  of  special  franchise :  elimin¬ 
ation  of,  discussed,  130-2. 

Variators :  used  in  heat  conducting 
pipes,  468. 

Ventilation :  of  electrical  subway, 
New  York  City,  381,  383 ;  of 

natural  gas  distributing  system, 
Columbus,  606,  607. 

Voltage :  variation  of,  Chicago  elec¬ 
tric  light,  203  ;  appliance  for  pro¬ 
tecting  telephone,  254,  316 ;  of 

wires  in  Baltimore  conduits,  384. 

Washington,  D.  C. :  indeterminate 
franchise,  36;  special  tax  on  gross 
receipts,  47  ;  monopoly  under  /Fed¬ 
eral  laws,  289-303  ;  electrical  con¬ 
duits,  392-6. 

Waste  of  water :  company  given  au¬ 
thority  to  prevent,  410. 

Water  :  measures  to  insure  purity  of, 
417,  418,  419,  422;  from  wells  in 
Indianapolis,  423 ;  quantity  and 
quality  specified,  Butte.  445 ;  sur¬ 
plus  from  city  pumping  station 
used  for  power,  525  ;  water  works 
and  water  supply  franchises, 
chap,  xiii,  397-450.  See  Purity 
of  water. 

Water  conduits  :  suggestion  in  model 
water  franchise,  402  ;  Los  Angeles, 
435.  See  Pipes,  Water  mains. 

Water  franchise :  a  model,  402-3. 

Water  gas :  statistics,  535 ;  candle 
power,  586. 

Watering  stock.  See  Overcapital¬ 
ization. 

Water  mains :  provisions  in  fran¬ 
chises,  403  ;  in  Ann  Arbor,  405-6 ; 


in  New  Orleans,  439 ;  required 
length,  Denver,  441  ;  extensions 
and  size  prescribed,  444  ;  material 
specified,  445. 

Water  power  :  for  generation  of  elec¬ 
trical  current,  147-8,  206-9 ;  in 
Duluth  electric  franchise,  162. 

Water  rights :  should  be  shared, 
70. 

Water  works :  significance  of,  26 ; 
franchise  should  guarantee  purity 
of  water  supply,  73.  See  Water. 

Welsbach  Boulevard  gas  lamps :  may 
be  required  by  city,  Cleveland 
natural  gas,  602. 

Western  Electric  Company ;  con¬ 
tract  with  Chicago  Telegraph 
Company,  224. 

Western  Union  Telegraph  Company : 
history  and  statistics,  323-9 ; 
capitalization,  325 ;  subsidiary 
companies,  325. 

Wheeling,  W.  Va.  :  artificial  gas  for 
lighting  supplied  by  city,  and 
natural  gas  for  fuel  supplied  by 
companies,  621. 

Wholesale  rates ;  discussion  of,  54, 
See  Special  rates. 

Wichita,  Ks. :  electric  franchise,  171- 
2  ;  refrigeration  franchise,  505. 

Wires :  ownership  of,  137 ;  dangers 
from,  141  ;  putting  underground, 
144;  cutting  authorized,  164,  176; 
precautions  prescribed,  165;  tele¬ 
phone,  236,  254 ;  exemption  from 
regulation,  259—60 ;  conduits  re¬ 
quired,  269 ;  penalty  for  illegal 
use,  272 ;  of  Chicago  telephone 
company,  281  ;  to  be  put  under¬ 
ground,  Portland,  Ore.,  308 ;  pro¬ 
tection  and  insulation  of,  316 ; 
mileage  of  telegraph,  323 ;  regula¬ 
tion  of  telegraph,  by  cities,  328- 
43  ;  Chicago  telegraph,  344  ;  Grand 
Rapids  Messenger  and  Packet 
company,  351  ;  messenger  and 
burglar  alarm,  Butte,  360 ;  mes¬ 
senger,  Nashville,  361  ;  general 
franchises,  St.  Louis,  370-2 ; 
Nashville,  373  ;  high  and  low  ten¬ 
sion  mileage  in  New  York  City, 
380-1  ;  in  Baltimore,  382-3. 

Wisconsin :  indeterminate  franchise 


710 


INDEX  OF  VOLUME  I 


in,  36 ;  discrimination  in  telephone 
rates,  245-9. 

Worcester,  Mass.,  gas  franchise, 
564-5. 


"Works.  See  Location  of  works. 

Yosemite  Park  :  water  sites 
426-31. 


in, 


Date  Doe 


BOSTON  COLLEGE 


3  9031 


1771310  8 


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